Suggestion to purchase chip stocks may be early

Time to buy Taiwan chipmaker stocks? Some investors are saying yes after semiconductors returned to the spotlight when Salomon Smith Barney Inc last week recommended investors buy chip stocks. Analysts expect semiconductor orders to pick up on signs the supply of new chips is low as computer sales have increased.

"We've been increasing our weighting in chip stocks in the last month-and-a-half," said Emil Wolter, who helps manage US$3 billion in global emerging markets at Pictet Asset Management in London. "Investors on a 12- to 18-month basis are going to be rewarded."

Analysts say the traditional high season of demand for electronics in the second half of the year may spur semiconductor purchases.

Intel Corp, the biggest computer-chip maker, said yesterday it expects sales of between US$6.2 billion and US$6.8 billion in the second quarter, more than some analysts estimate.

To be sure, Taiwan Semiconductor Manufacturing Co (TSMC, 台積電), the biggest chipmaker on a made-to-order basis, said yesterday its production capacity will fall to 50 percent in the second quarter because its largest customers including Altera Corp, the No. 2 maker of programmable computer chips, are ordering fewer chips.

United Microelectronics Corp (UMC, 聯電) Chairman John Hsuan (宣明智) said Monday there is no sign a "recovery is coming" for chips. Merrill Lynch & Co forecasts that global semiconductor demand this year will drop 5 percent to 10 percent.

"It's definitely too early to be building positions" in semiconductor stocks, said Dan Heyler, an analyst at Merrill Lynch & Co in Hong Kong.

Some see signs of demand for semiconductors in a pickup in sales for computers and chip designers. Quanta Computer Inc (廣達電腦), a notebook computer maker, said first-quarter sales rose 42 percent to US$805 million, a record from the year-ago period, as customers such as Dell Computer Corp and Apple Computer Inc ordered more notebook computers.

Via Technologies Inc (威盛電子), Taiwan's biggest chip designer, said sales last month rose 24 percent to US$122 million from February because of rising demand for chipsets.