Sat, Sep 17, 2005 - Page 11 News List

Chipmaking firms face glut next quarter: report

TOO MANY CHIPS Semiconductor firms such as Texas Instruments are staring at a mountain of unused chips as supply outstrips demand, according to IC Insights

BLOOMBERG AND AP , SAN JOSE, CALIFORNIA

Texas Instruments Inc and STMicroelectronics NV are among chipmakers that may face oversupply next quarter because of rising inventories of semiconductors that go into consumer electronics and mobile phones, market researcher IC Insights Inc said.

Shipments of so-called analog-type chips, which are cheaper and less sophisticated than the type of semiconductors used in computers, are set to outpace demand for the products in the next two quarters, Bill McClean, president of Scottsdale, Arizona-based IC Insights, said in a telephone interview yesterday.

The projections differ from forecasts given this month by Intel Corp and Samsung Electronics Co for better-than-expected demand. Texas Instruments and National Semiconductor Corp have also said this month orders are exceeding their own forecasts.

"The chipmakers are always the last guys to find out that there is excess inventory," said McClean, who had earlier projected the glut to occur next year or in 2007. "The inventory situation has really kind of shown itself recently so it is something that we're identifying right now."

In May, IC Insights raised its worldwide semiconductor revenue forecast for this year to 4 percent, compared with an earlier projection for industry sales to shrink 2 percent, spurring an advance in Asian technology stocks. The MSCI Asia-Pacific's information technology index had its first monthly gain in three.

Analog chipmakers including Texas Instruments, STMicroelectronics NV and National Semiconductor face the biggest glut, McClean said. Hurricane Katrina may exacerbate the glut prediction, he said.

In Asia, chipmaker shares fell, dragging the Morgan Stanley Capital International Inc Asia-Pacific index lower. Taiwan Semiconductor Manufacturing Co (台積電), the world's largest producer of made-to-order chips, fell 2.4 percent to NT$52.60 on the Taiwan Stock Exchange. Samsung Electronics, the world's largest memory chipmaker, fell 2.1 percent to 594,000 won as of 2:50pm in Seoul.

Yesterday, analyst Bhavin Shah and his colleagues at JPMorgan Chase & Co downgraded their view on makers of dynamic random access memory chips.

JPMorgan lowered its ratings, citing increased supply of DRAM and lower price. JPMorgan cut its stock recommendations on chipmakers such as Nanya Technology Corp (南亞科技), Powerchip Semiconductor Corp (力晶半導體) and Samsung Electronics.

Nanya shares fell 6.1 percent to NT$19.25 and Powerchip dropped 5 percent to NT$19 in Taipei.

Trying to meet demand for its chip sets and other products used in computers, Intel said Thursday it plans to invest US$345 million to beef up the capacity of its manufacturing plants in Colorado and Massachusetts.

The facilities primarily focus on the chips that serve as the bridge between a personal computer's microprocessor and system memory.

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