Optimism begins to return to chip industry

Optimism begins to return to chip industry
By Bolaji Ojo , EBN
March 7, 2003 (7:13 p.m. EST)
URL: http://www.eetimes.com/story/OEG20030307S0024

MANHASSET, N.Y. — With the latest statistics showing strong chip sales in January on a year-over-year basis, the Semiconductor Industry Association is standing by its prediction of double-digit growth in 2003.

In a report this week, the SIA said that January's 22 percent sales growth indicates an economic turnaround could further boost demand for the rest of the year.

"We continue to forecast double-digit revenue growth for 2003 and broad-based strength in our industry, driven by a recovery in information technology spending, a fast-paced global wireless market, and the emergence of new growth sectors," said George Scalise, president of the SIA, in a statement.

Although some analysts warned that demand remains uncertain, speculation that the IC market may exhibit a solid first quarter rose after the SIA's upbeat January sales report was followed by positive revised guidance for the March quarter by several semiconductor suppliers.

"If end-market demand snaps back in the second half, IC volumes may surpass 2000 levels," said Satya Chilara, an analyst at WR Hambrecht & Co. Inc., San Francisco.

The SIA said its three-month moving average showed chip sales rose in January to $12.2 billion, up 22 percent from $10 billion in January 2002 but down 2.4 percent from $12.5 billion in December. Actual January sales increased 19 percent, to $10.8 billion from $9 billion in January 2002. In December, actual semiconductor sales were $13.5 billion.

Based on the SIA's adjusted figures, January chip sales in Japan grew faster than in other markets, followed closely by Asia-Pacific, which now accounts for about 37 percent of worldwide IC sales, up from 34 percent in January 2002. Japan led the market in January with a 34 percent expansion, to $2.71 billion from $2 billion in January 2002.

Asia-Pacific grew 33 percent, to $4.51 billion from $3.4 billion last January, while European chip sales rose 16 percent, to $2.47 billion from $2.13 b illion. Chip sales increased at a much slower 3 percent in the Americas, to $2.54 billion from $2.47 billion.

January sales in all four regions fell on a monthly sequential basis, but the declines were all in the low single digits and attributable to the customary seasonal weakness the semiconductor industry experiences at the beginning of a year, according to Scalise.

"For more than a decade now, with the exception of the boom year 2000, sales have been slightly lower in January than in December because of the seasonality of the semiconductor industry," he said.

Still, there are indications that first-quarter sales will be at the upper end of many companies' estimates. This week, Cypress, Fairchild, and Xilinx all raised their March-quarter revenue forecasts, citing stronger-than-anticipated sales in several end markets, including wireless and PCs.

Cypress Semiconductor Corp. (San Jose, Calif.), which had earlier forecast that its first-quarter revenue would be unchanged from the $174.4 mi llion reported for the prior quarter, said it now projects a 2 percent increase, to about $178 million.

"We started the first quarter needing 43 percent of turns business to meet our guidance for the quarter," the San Jose company said in a statement. "Turns have been slightly better than expected two months into the quarter and are expected to continue at a good pace."

This doesn't mean Cypress, which is pushing ahead with a restructuring program that has included the layoffs of 530 employees since the fourth quarter of 2002, is out of the woods, according to analysts.

"We continue to like this company a lot," said Dan Scovel, an analyst at New York-based Needham & Co. Inc. "Nevertheless, we remain concerned with Cypress' current lack of profitability, as well as the company's significant exposure to moribund communications-related markets."

Also this week, Fairchild Semiconductor International Ltd. and Xilinx Inc. informed analysts that they expect revenue for the first quarter to be at the upper end of their prior estimates. Fairchild, which had earlier predicted that revenue would be flat to 5 percent lower from the December quarter, said it now expects first-quarter revenue to be up 3 percent.

"Order rates were fairly steady throughout the first six weeks of the quarter, and have recently increased as we moved past the Chinese New Year holiday," the South Portland, Maine, company said.

Xilinx (San Jose, Calif.) declared in an update that its first-quarter revenue will be closer to the upper end of its earlier guidance of $285 million to $295 million. The company said sales in the Americas will be flat sequentially, lower in Japan, and higher in Asia-Pacific and Europe.