Executives say the bottom fell out of the bottom
At SEMI gala, worried managers tried to assess the impact of terrorist attacks and unrelenting downturn
By Mark LaPedus
Semiconductor Business News
(09/28/01 17:17 p.m. EST)
For months, executives from leading semiconductor and chip-equipment makers have insisted that the current IC downturn had hit the bottom in the third quarter, with a probable recovery due in 2002. But now a growing number of Silicon Valley executives do not seem to be sure that they are seeing light at the end of the deep downturn tunnel.
In fact, hopes for a measurable rebound in 2002 barely flickered at Thursday night's annual awards dinners, hosted by the Semiconductor Equipment and Materials International (SEMI) trade group in San Jose.
At the somber gala, some chip executive said the current IC downturn, coupled with the impact of the Sept. 11 terrorist attacks in the United States, could prolong the slump into next year. And there are even some rumors that a major Wall Street brokerage firm was preparing to slash its chip forecast for 2002, from a 20% increase to no growth at all compared to 2001.
Even the most upbeat chip executives sounded pessimistic about the current and future state of the industry. "Obviously, there's turmoil in the industry," said T.J. Rodgers, president and CEO of Cypress Semiconductor Corp. of San Jose, during a panel discussion at the SEMI dinner. "I'm worried about it," Rogers admitted.
There are still some trouble spots in the market, including a prolonged inventory glut and overcapacity. And the deadly terrorists attacks in New York and Washington took a toll on the industry too, pointed out Wilfred Corrigan, chairman and chief executive officer of LSI Logic Corp. in Milpitas, Calif.
Those terrorist attacks will "have some impact in the industry," Corrigan said. "The third quarter [of this year] was supposed to be the bottom. This could get pushed out somewhat," he said during the panel discussion.
As a result, the IC industry could go from very bad to much worse in the remaining months of 2001. The worldwide chip industry could end up with a decline of 34-to-35% this year from revenues in 2000, Corrigan cautioned.
In the product sectors, there is both good and bad news. The communications chip business is weak, but the consumer market "is two times better than anything else right now," according to the LSI Logic chief executive.
But on the other hand, the PC market is "unpredictable" right now, cautioned Hector de J. Ruiz, president and chief operating officer of Advanced Micro Devices Inc in Sunnyvale, Calif.
"It's so unpredictable right now. I don't think anyone can predict what will happen in the fourth quarter of [2001 and beyond]," said Ruiz in a brief interview with SBN at the SEMI event. "The PC industry is in turmoil. And there are also lot of fundamental changes going on in the industry."
There is also plenty of turmoil in the chip-equipment market. For some time, this trouble industry segment has been rocked by poor product demand, growing losses, and layoffs. And most executives and analysts predict that this market won't rebound at least until the second half or 2002--or beyond.
"We see some technology buys out there, but there are still no capacity buys [for chip-equipment right now]," summarized Kenneth Schroeder, president and chief executive of metrology giant KLA-Tencor Corp., based in San Jose.
But still, some executives believe there are indications that the slump has hit a bottom. "We think we're at the bottom," said Frank Masciocchi, vice president of sales and marketing at Nikon Precision Inc. of Belmont, Calif. "Recently, we have not seen any order cancellations or push-outs," he told SBN.
Clearly, IC and chip-equipment executives would like to forget 2001, and most are still looking forward to 2002, but now many believe next year may not be as good as some had hoped.
Some executives tried hard to put a positive spin on the situation: Consider this: "2002 will not be as bad as 2001," suggested industry veteran James W. Bagley, chairman and chief executive officer of Lam Research Corp. in Fremont, Calif. |
