Signs point to semiconductor rehab

It may be too early to declare a recovery in the IC market, but there are suddenly signs of life in the arena.

Silicon foundry vendors Chartered Semiconductor, United Microelectronics Corp., Taiwan Semiconductor Manufacturing Co. and others are seeing a slight rebound. Orders are beginning to flow for select wireless devices, NAND flash and other products, but some contend that the channels are just being replenished after an inventory fire sale.

Texas Instruments Inc. reported last week of some order activity, but the chipmaker is still seeing a weak market. Another analog player, National Semiconductor Corp., said it plans to close two facilites and cut 1,725 jobs, or 26 percent of its workforce, after reporting that revenue declined more than 30 percent for the quarter ended March 1. The company expects sales to decline further in the current quarter.

Meanwhile, Macronix International Co. Ltd and Microchip Technology Inc. are separately seeing slightly different patterns.

Microchip provided a better-than-expected forecast for the quarter, but it also cut its capital spending down to nearly zero. Net sales are expected to be down 8 to 12 percent from the third quarter of fiscal 2009 ended Dec. 31, 2008. Earnings per diluted share on a GAAP basis are expected to be approximately 9 to 11 cents, excluding acquisition related expenses and gains or losses on trading securities.

During its Jan. 29 earnings conference call, Microchip did not provide any financial guidance for the quarter ending March 31, but disclosed its internal plan for the quarter was for net sales of $173 million, or down approximately 10 percent from the third quarter of fiscal 2009.

Steve Sanghi, Microchip's president and CEO, painted a mixed picture. "We saw our total backlog bottom out early in the quarter and it has since shown gradual growth," he said in a statement.

"We are seeing a high level of expedite requests from our customers, despite relatively short lead times on all of our products. We believe this indicates that customer inventories are depleted and that customer order patterns are now trying to catch up to actual demand. While it is too early to call this a trend, we are encouraged by these signs, and hope that the current quarter can be the bottom of this cycle," Sanghi said.

To cut costs and boost margins, Microchip intends to reduce production. "As a result of actions that we implemented during this quarter, we have reduced manufacturing output by approximately 29 percent from the December 2008 level or down approximately 43 percent from the peak level of September 2008," he said. "In response to the current environment, Microchip dramatically cut its capital expenditure budget to only $15 million for fiscal year 2010, consisting primarily of maintenance-type capital items."

Looking at the market from another angle, Taiwan's Macronix raised its forecast to some degree. The flash chipmaker said unit shipments will be between minus 5 percent to plus 5 percent in the quarter, compared to minus 20 percent to minus 30 percent in its previous outlook.

Fab-utilization rates are expected to hit 50 percent in the quarter, compared to 40 to 50 percent from its previous forecast.

"The improved Q1 09 guidance is resulted from better than expected demands from East-Asia market; higher gross margin than previous expectation is because of better ASP, superior product mix and favorable (foreign exchange) rate," according to Macronix. "However, global financial crisis is still influencing the economic environment and there are many uncertainties about industry competition, the company cautions investors to take necessary attentions."

- Mark LaPedus
EE Times