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To: Darren who wrote (59465)	7/7/1998 11:28:00 PM
From: VICTORIA GATE, MD	Read Replies (1) \| Respond to of 186894

INTERVIEW-TIsees 1998 chip market shrinking Reuters Story - July 07, 1998 15:44 By Kieran Murray DALLAS, July 7 (Reuters) - Texas Instruments Inc. Chief Executive Officer Tom Engibous said Tuesday he expects the global semiconductor market to shrink this year as Asia's economic crisis and weak chip prices bite into sales. Texas Instruments executives had earlier this year predicted the global chip market would grow 10 percent and later lowered that estimate to about 5 percent, but Engibous said even that was now unrealistic. "Unless something picks up, it looks like it is going to be negative," Engibous said in an interview with Reuters. "I think the number will be more than one or two percent negative." Continuing oversupply and weak prices for memory chips, Asia's economic troubles and weaker than expected demand for personal computers have all hurt U.S. chip makers in recent months. Engibous said the recovery of Asia's demand will likely determine how quickly, or slowly, the industry can recover as multinational companies, who are concerned about their Asia operations, have cut back their discretionary spending on computer upgrades. "There is no question that the personal computer growth rate has slowed this year," Engibous said. "We see the follow-through when it gets to modems and disk drives, which are peripherals for those products." With the increasingly commoditized DRAM memory chip prices slumping dramatically since late 1995, Texas Instruments has refocused its attention on more specialized chips, especially digital signal processors (DSPs) used in cellular phones, modems and hard drives. That strategy has paid off as the global DSP market has been growing at around 30 percent, although Engibous said on Tuesday even that market has seen a slowdown in recent months. He said figures from the end of March or April showed the DSP market, which TI dominates with a share of about 45 percent, growing at an annual rate of 22 percent. "It is less than 30 percent so far this year but in a market where the rest of total semiconductor business - with and without memory - is negative, 22 percent is not bad," Engibous said in the interview at TI's headquarters in Dallas. He said the so-called "mass market" for standard DSPs and demand from cellular telephone customers remain "very strong" but that sales to disk drive and modem manufacturers have been hit by weak markets for those products. "Disk drives have been doing about what the personal computer business has been doing. Growth has slowed and there has been an excess of inventory so it has been less than robust," Engibous said. Texas Instruments last month sold its memory chip business to Micron Technology Inc in a stock and debt deal valued at about $800 million. Under the deal, Micron will issue 28.9 million common shares to Texas Instruments. That gives TI an initial 12 percent stake in Micron and it could lift that to 16-17 percent by converting notes into an additional 12 million shares. Engibous said on Tuesday that TI will sell its stake once the memory market recovers from its current slump. "We'll wait for the next cycle. We'll sell hopefully when the stock price is high and capture several billion dollars in return," he said. "Our objective is not to be a 10-year holder of Micron stock." He declined to predict when memory prices might recover but said the length of previous cycles would suggest "we are probably getting near the end" and that it might rebound within a year.