Intel says it's too soon to call chip rebound

Elinor Mills Abreu

SAN FRANCISCO: Intel Corp. Chairman Andy Grove said on Tuesday it may be too early to forecast a rebound in the semiconductor sector despite recent industry outlooks indicating an upturn may be on the horizon. "During the course of the year, nothing much has happened up or down" to overall chip sales, Grove told reporters after his keynote speech here at an industry conference. "The beginning of the end? I wouldn't be so optimistic."

Global sales of semiconductors fell some 30 percent in 2001 to about $140 billion from a record $200 billion in 2000. Revenue at Intel, the world's largest chipmaker, fell 21 percent to $26.5 billion in 2001 from 2000. Grove said the current chip downturn is unique because it followed massive investment and spending on technology during the Internet boom of the late 1990s.

The industry "was operating, in retrospect, way ahead of the underlying demand," he said. "The excess of the latter 1990s was so much bigger than previous excesses." To pull out of the doldrums, companies need to cut back on chip-making capacity in factories across the globe, said Grove, who was the fourth employee hired shortly after Intel was founded in 1968.

Santa Clara, California-based Intel lost $200 million on a $1 billion revenue base during the downturn of 1984-1985, but has fared better this time, he said. "Other than the stock price, the actual operation of the company didn't suffer as much" in the current downturn, Grove said.

Shares of Intel, which makes microprocessors that serve as the brains of personal computers, closed on the Nasdaq at $18.13, up 45 cents, or 2.5 percent. The stock is off 76 percent from its all-time high of $74.88 on Aug. 31, 2000.

In November, the Semiconductor Industry Association said global sales of semiconductors were recovering and forecast to rise over the next few years following the latest two-year downturn. Last week, Intel, rival Advanced Micro Devices Inc. and Fairchild Semiconductor International Inc. raised their fourth-quarter revenue outlooks, saying sales of PCs and cell phones were going better than anticipated.

Also last week, the Semiconductor Equipment and Materials International trade group said manufacturers of equipment used to make semiconductors expect sales to decline by about a third this year but recover slightly in 2003. In his keynote speech, Grove mentioned some of the applications that advances in computing will enable, such as speech-to-text translation and human disease profiling based on bioscientific analysis of protein structures.

Grove spoke at the International Electron Devices Meeting held by the Institute of Electrical and Electronics Engineers, which is also known at IEEE.

© Reuters