SAN
FRANCISCO:Semiconductor companies, battered by declining revenue and
shrinking profits in the past year, are starting to forecast the
return of modest growth, suggesting that some sectors of the
beleaguered industry are rebounding.
Chip companies
that reported quarterly results in the past week met Wall Street
expectations. More importantly, analysts and executives said, many
forecast sales growth of as much as 20 percent for the current
quarter from the prior one.
But while last
year's recession flattened every segment of the semiconductor
industry and knocked some $83 billion out of global sales, the
recovery is emerging a patch at a time, and more slowly for those
that depend on the PC industry, like leader Intel Corp., analysts
said.
"It's
sectors of the semiconductor business that are coming back now, not
the industry as a whole," said Arun Veerappan, an analyst at
Robertson Stephens.
One example of
strength, Veerappan said, is the market for analog and mixed signal
chips, used in everything from cell phones to battery chargers to
industrial gauges. "It's a space that doesn't grow out of
proportion when times are good and doesn't decline too much when
times are bad," he said.
Communications
chip makers clamber back
Specialty communications chip makers
have also reported signs of a recovery, and perhaps as a result,
delivered a more upbeat view of the state of the $139 billion
industry.
"The
semiconductor industry overall clearly is in a recovery mode,"
Dwight Decker, chief executive of Conexant Systems Inc., said last
week in an interview. Newport Beach, California-based Conexant, which
makes chips for cellular phones, high-speed Internet modems, video
game consoles and television set-top boxes, reported on Wednesday a
narrower-than-expected loss in its fiscal second quarter on higher
growth in all of its business.
Conexant, which
is spinning off three divisions, also said it expects revenue in the
current quarter to rise 3 percent to 5 percent over the $241 million
reported in its second quarter. Communications and networking
semiconductor designer Broadcom Corp. also forecast sequential
revenue growth for the next two quarters as customers resume ordering
chips that they had overstocked throughout much of last year and said
its ability to gauge future revenue levels has improved.
"We have a
reasonable level of visibility on our businesses," Bill Ruehle,
Broadcom's chief financial officer said in an interview. Similarly,
PMC-Sierra Inc., a leader in specialty chips for metro area networks
used to link nearby offices to long-haul data links, forecast a 10
percent to 20 percent rise in networking revenue in the second
quarter from $42.4 million in the first.
"Strong
sequential growth, strong off of a modest base, is what we can
expect," John Sullivan, PMC-Sierra's chief financial officer
said in an interview.
Free fall and
then bounce
For all of last year, the semiconductor business,
had been in a free fall, tumbling more than 30 percent in its
biggest-ever revenue decline -- year over year.
Slowing global
economies, weak corporate investment in technology and a glut of
chips, most notably in telecommunications, ripped through the
industry, causing hundreds of millions of dollars in losses and tens
of thousands of layoffs.
But for this
year, the Semiconductor Industry Association is calling for a modest
recovery, with global chip sales set to rise about 6 percent. The
trade group sees things taking off in 2003, with growth of more than
20 percent.
Even so, some of
the bigger names won't be arriving at the return-of-revenue-growth
party until later this year, if at all. Intel, the world's biggest
semiconductor manufacturer that derives about 80 percent of its
revenue from the personal computer business, played it safe when it
issued guidance for its second quarter.
The No. 1
chipmaker forecast second-quarter revenue of $6.4 billion to $7
billion, implying a decrease of almost 6 percent or an increase of a
bit more than 3 percent from first-quarter revenue of $6.78 billion.
Advanced Micro
Devices Inc., Intel's principal competitor in the market for
microprocessors, noted that it expects a decline in second-quarter
revenue of 5 percent to 10 percent from the $902.1 million it had in
the first period.
But those
forecasts are in line with historical patterns in the notoriously
cyclical PC industry; industry revenues typically decline in the
second quarter from the first. Still, Intel's guidance offers
optimists the hope that revenue will rise, at least a little bit. In
the past five years, Intel's second-quarter revenue has declined by
an average of 3 percent from the first quarter.
"Intel's
visibility for an economic recovery is still limited but is still
expecting a normal seasonal (second half), wrote Dan Niles, an
analyst at Lehman Brothers. "We continue to believe the recovery
will be stretched toward the late part of 2002."