Chip Firms Forecast Piecemeal Recovery
biz.yahoo.com
By Duncan Martell
SAN FRANCISCO (Reuters) - Semiconductor companies, battered by declining revenue and shrinking profits in the past year, are starting to forecast the return of modest growth, suggesting that some sectors of the beleaguered industry are rebounding.
Chip companies that reported quarterly results in the past week met Wall Street expectations. More importantly, analysts and executives said, many forecast sales growth of as much as 20 percent for the current quarter from the prior one.
But while last year's recession flattened every segment of the semiconductor industry and knocked some $83 billion out of global sales, the recovery is emerging a patch at a time, and more slowly for those that depend on the PC industry, like leader Intel Corp. (NasdaqNM:INTC - news), analysts said.
``It's sectors of the semiconductor business that are coming back now, not the industry as a whole,'' said Arun Veerappan, an analyst at Robertson Stephens.
One example of strength, Veerappan said, is the market for analog and mixed signal chips, used in everything from cell phones to battery chargers to industrial gauges. ``It's a space that doesn't grow out of proportion when times are good and doesn't decline too much when times are bad,'' he said.
COMMUNICATIONS CHIP MAKERS CLAMBER BACK
Specialty communications chip makers have also reported signs of a recovery, and perhaps as a result, delivered a more upbeat view of the state of the $139 billion industry.
``The semiconductor industry overall clearly is in a recovery mode,'' Dwight Decker, chief executive of Conexant Systems Inc. (NasdaqNM:CNXT - news), said last week in an interview.
Newport Beach, California-based Conexant, which makes chips for cellular phones, high-speed Internet modems, video game consoles and television set-top boxes, reported on Wednesday a narrower-than-expected loss in its fiscal second quarter on higher growth in all of its business.
Conexant, which is spinning off three divisions, also said it expects revenue in the current quarter to rise 3 percent to 5 percent over the $241 million reported in its second quarter.
Communications and networking semiconductor designer Broadcom Corp. (NasdaqNM:BRCM - news) also forecast sequential revenue growth for the next two quarters as customers resume ordering chips that they had overstocked throughout much of last year and said its ability to gauge future revenue levels has improved.
``We have a reasonable level of visibility on our businesses,'' Bill Ruehle, Broadcom's chief financial officer said in an interview.
Similarly, PMC-Sierra Inc. (NasdaqNM:PMCS - news), a leader in specialty chips for metro area networks used to link nearby offices to long-haul data links, forecast a 10 percent to 20 percent rise in networking revenue in the second quarter from $42.4 million in the first.
``Strong sequential growth, strong off of a modest base, is what we can expect,'' John Sullivan, PMC-Sierra's chief financial officer said in an interview.
FREE FALL AND THEN A BOUNCE
For all of last year, the semiconductor business, had been in a free fall, tumbling more than 30 percent in its biggest-ever revenue decline -- year over year.
Slowing global economies, weak corporate investment in technology and a glut of chips, most notably in telecommunications, ripped through the industry, causing hundreds of millions of dollars in losses and tens of thousands of layoffs.
But for this year, the Semiconductor Industry Association is calling for a modest recovery, with global chip sales set to rise about 6 percent. The trade group sees things taking off in 2003, with growth of more than 20 percent.
Even so, some of the bigger names won't be arriving at the return-of-revenue-growth party until later this year, if at all.
Intel, the world's biggest semiconductor manufacturer that derives about 80 percent of its revenue from the personal computer business, played it safe when it issued guidance for its second quarter.
The No. 1 chipmaker forecast second-quarter revenue of $6.4 billion to $7 billion, implying a decrease of almost 6 percent or an increase of a bit more than 3 percent from first-quarter revenue of $6.78 billion.
Advanced Micro Devices Inc. (NYSE:AMD - news), Intel's principal competitor in the market for microprocessors, noted that it expects a decline in second-quarter revenue of 5 percent to 10 percent from the $902.1 million it had in the first period.
But those forecasts are in line with historical patterns in the notoriously cyclical PC industry; industry revenues typically decline in the second quarter from the first.
Still, Intel's guidance offers optimists the hope that revenue will rise, at least a little bit. In the past five years, Intel's second-quarter revenue has declined by an average of 3 percent from the first quarter.
``Intel's visibility for an economic recovery is still limited but is still expecting a normal seasonal (second half), wrote Dan Niles, an analyst at Lehman Brothers. ''We continue to believe the recovery will be stretched toward the late part of 2002.`` |
