AMD's warning on profits may harm chip sales

A revised profit warning by Advanced Micro Devices Inc (AMD), the world's second-largest supplier of computer processors, is expected to have a marked impact on sales of its Taiwanese chipset partners, industry analysts said yesterday. Those companies -- VIA Technologies Inc (威盛電子), Silicon Integrated Systems Corp (SiS, 矽統科技) and ALi Corp ([揚智科技], formerly Acer Laboratories Inc) -- all provide chipsets for AMD.

"AMD cannot reach its target in the third quarter and this will significantly affect Taiwan's chipset providers. VIA is the biggest Taiwanese supplier of chipsets to AMD," Ben Lee (李輔邦), a semiconductor analyst at Gartner Inc, said. AMD revised its third quarter sales yesterday, forecast down from US$600 million to US$500 million.

Processors act as the brains of a computer and chipsets operate like the central nervous system, regulating and managing the performance of the computer.

According to officials at the respective companies, 50 percent of VIA's sales go to AMD, 30 percent to 40 percent at SiS and 10 percent to 15 percent at Ali. All three companies downplayed the impact of AMD's revision, but the stock market still reacted poorly.

Both VIA and SiS's stocks closed limit down at 7 percent at the close yesterday. VIA ended the day down NT$3.2 to NT$43.9 per share, and SiS lost NT$2.1, ending at NT$29.1. ALi's stock remained unchanged.

ALi's public relations director, Gina Chao (趙蕙文), confirmed that the company's proportion of sales to AMD was around 15 percent, but declined to reveal sales predictions.

An SiS official dismissed the negative impact of AMD's announcement, saying that the company's sales increased by 28 percent in September because of increased demand for graphics chips from Intel.

But the company's marketing engineer Frank Chen (陳微州) said, "There will be some effect from AMD's announcement, but because our growth rate is so high, it will not be so serious."

VIA marketing specialist James Campbell conceded that a drop in AMD's sales would have some impact on the company's sales performance.

"We do not expect any major effect," Campbell said. "We are doing much better in terms of market share with this product than we were four to five months ago."

VIA's fourth quarter growth prospects may remain a concern for some investors.

"The market will pay close attention to VIA next week," said Nathan Lin (林宗賢), an analyst at SinoPac Securities Corp (建華證券).

But Lin said the situation may boost sales for VIA between 2 percent and 5 percent.

"Fourth-quarter sales are mostly coming from Europe and developing markets such as China, where there is more demand for AMD, so there will be a short-term increase in AMD's sales in October," he said.

VIA's September sales, however, indicate that there is downward pressure on the selling price of each chipset it sells, he said.

narrowing margin

VIA's figures show that shipments increased 20 percent last month compared to August, but revenue increased by only 10 percent, indicating a reduced average selling price. Lin, therefore, does not expect VIA to meet market expectations on margins in the third and fourth quarters.

"VIA will still suffer in Q4 as AMD is losing market share, and this will continue to affect VIA," he said.

On Wednesday, VIA's shares climbed on the heels of improved sales performance at US-based Dell Computer. VIA supplies chips to the local manufacturers of Dell's computer products. VIA's sales, however, have declined almost 30 percent year-on-year through the end of September.