News story: note link to article to be published tomorrow
Chip sector primed for
upside
By Corey Grice
Staff Writer, CNET NEWS.COM
August 6, 1998, 5:10 p.m. PT
The semiconductor industry got a break from its
ongoing woes today, with many of the market
leaders gaining as the stock market closed higher
than it has all week. Meanwhile, a new report
provides evidence that the sector soon may
rebound.
National Semiconductor
was the big winner
today, closing up nearly
17 percent at 13.875 on
news that investment
bank .Donaldson Lufkin
& Jenrette upgraded the
chipmaker to a "top
pick" rating from "buy."
Dallas Semiconductor
was up more than 8
percent, finishing at
33.375, and Advanced
Micro Devices closed
more than 5 percent
higher at 16.75.
Cirrus Logic, Analog
Devices, Cypress
Semiconductor, LSI
Logic, Micron
Technology, Rambus,
and Intel all gained
ground today as well.
(Intel is an investor in
CNET: The Computer
Network, publisher of
News.com.)
Despite today's gains,
this year largely has been
a bust for the
semiconductor industry,
as the Asian flu, excess inventory, and pricing
pressures affected chip makers across the board.
Many have closed wafer fabrication plants or have
been forced to impose layoffs.
Analysts remain divided over when the industry will
rebound, but an article slated to be published
tomorrow by Semiconductor Fabtech concludes
that the end of the long drought is in sight.
The article, part of a report on semiconductor sales
forecasts between 1998 and 2002, contends that
this year will be rock-bottom for the industry.
"Semiconductor industry growth has averaged 17
percent per year for over 30 years--through two oil
crises, war, recession, the collapse of the Eastern
bloc, the opening of China, and other convulsions,"
the article reads. "At some point, industry growth
must slow to more closely match the rate of growth
of electronic equipment sales--which averaged 10
percent per year during the past 30 years. But in
the meantime, there is good reason to believe that
growth will return soon."
The article was written by Bill McClean, president
of IC Insights, a semiconductor market research
firm, along with executives from Fisher-Holstein, a
wafer fabrication cost-of-ownership consulting firm.
"When the computer market does well, the
[integrated circuit] market does well," McClean
said. "Typically, the lines follow each other pretty
closely."
McClean pointed out that computer sales have
been strong this year, while chip sales have
slumped. Provided Asian economies don't take a
turn for the worse, he argued, those increased
computer sales soon will translate into
semiconductor revenues.
"You can't always tell the turning point, but at some
point it's going to take an uptick, and I think that's
going to happen by the end of the year," he said.
Earlier in the year, many of the major PC makers
had excess inventories in the distribution channel,
causing them to cut back on microchip orders.
McClean said most of those inventory issues have
been cleared up now.
"Compaq is looking for a big second half, and a lot
of the companies are gearing up for a big Christmas
season because the $1,000 PC is in full force,"
McClean said. "Last year it was kind of a novelty,
and Intel has helped legitimize it with the Celeron
processor."
Some analysts agreed that the second half of the
year will prove to be stronger for semiconductor
sales. But for the most part, industry experts have a
number of concerns and remain skeptical about
when the market will rebound.
"We're not being contrary," said Danny Lam,
director of Fisher-Holstein, and co-author of the
report. "It's always when people say that there's no
end in sight that it takes an upturn." |
