Global Sources
EE Times-Asia
Stay in touch with EE Times Asia
EE Times-Asia > Manufacturing/Packaging

Chipmakers brace for tough times

Posted: 25 Nov 2008 ?? ?Print Version ?Bookmark and Share

Keywords:IC downturn? market forecast? chip industry?

A consensus was reached at the Semiconductor Industry Association's (SIA) forecast: The IC industry is in for some tough sledding.

With regard to the IC downturn, Morris Chang, chairman of Taiwan Semiconductor Manufacturing Co. Ltd, was blunt during a speech after being presented with an award from the SIA. He was named recipient of the 2008 Robert N. Noyce Award, the highest honor given by the SIA.

"Things are tough," Chang said. The current IC "downturn will be longer and deeper than the ones we've been through."

Chang also said that it could be some time before the chip industry returns to growth, but the down cycle "shall pass." When that event occurs, "the industry will grow and it will be stronger than ever," he added.

As reported, the SIA reduced its IC forecast and projected the first decline in sales since 2001. In fact, the trade group predicts a two-year chip decline.

The new forecast projects IC sales of $261.2 billion in 2008, a 2.2 percent increase from $255.6 billion in 2007, according to the SIA. The group projects that IC sales will decline by 5.6 percent to $246.7 billion in 2009, before resuming growth in 2010. Sales will grow by 7.4 percent in 2010 to $264.9 billion and by 7.5 percent in 2011 to $284.7 billion.

At present, though, business looks tough for chipmakers. "Except for the unusually-defensive Microsemi, we cannot think of a single chip firm that will see revenues fall less than 10 percent sequentially in 4Q," said Craig Berger, an analyst with FBR, in a report.

Next in line
Most chipmakers, excluding analog/mixed-signal specialist Microsemi, have lowered their chip forecasts. Who's next?

"As such, we think it is likely that Broadcom will preannounce lower 4Q revenues in the next several weeks, and we are cutting revenue and EPS estimates in anticipation of such a move," he said. "We are cutting our 2009 EPS estimate from $1.50 to $1.05, which now assumes an 8 percent organic revenue decline, and much slower growth in operating expense spending in 2009."

Another bad sign is the downturn within the contract manufacturing sector, which is critical for the supply chain.

"We have not been widely bullish on our EMS names given the years of problems. But back in May we did get more positive as it seemed the group was finally overcoming its demons of overcapacity and aggressive pricing, with the caveat that the new 'gotcha' was the macro economy," said Louis Miscioscia, an analyst with Cowen and Co., in a report. "The events of September and October moved the world from a weak but normal seasonal December quarter, to a horrible recession."

And, of course, fab-tool vendors are getting hammered. For example, "Novellus lowered 4Q 08 guidance at its mid-quarter update, but the size of the cut was worse than feared," said Edwin Mok, an analyst at Needham & Co. LLC.

"Weak bookings guidance suggests revenue will further decline in 1H '09. Just like others facing the deteriorating market, Novellus is planning another round of cost reductions (probably includes a layoff) to lower breakeven," he said in a report.

"While Novellus was probably too aggressive on its prior guidance, Novellus specifically stated that the push-outs are purely Asian memory makers. We believe Samsung and Toshiba have reduced orders amid a weak memory market," he said. "Comments also suggest Intel orders remain in-tact; however, we remain concerned that Intel may slow 32nm ramp and reduce capital spending in 2009."

- Mark LaPedus
EE Times

Article Comments - Chipmakers brace for tough times
*? You can enter [0] more charecters.
*Verify code:


Visit Asia Webinars to learn about the latest in technology and get practical design tips.

Back to Top