For Park Chong-sup, who heads the world's second-largest maker of computer memory chips, an unexpected interest rate cut by the US Federal Reserve wasn't enough to alter his own gloomy outlook.
As markets worldwide rallied on the Fed's half-point cut, Park, chief executive of Hynix Semiconductor Inc, was telling analysts that demand for chips may keep sliding through June.
"The overall semiconductor market and world economy remain relatively weak," Park told analysts as he reported a US$354 million loss, the company's second quarterly loss in a row.
Pessimism like that suggests the Fed's move may be too little, too late to revive the US economy. And that means that even as Asian stocks rallied, the outlook for many chipmakers -- among the region's biggest single exports -- has rarely been more somber. Consider Singapore's Chartered Semiconductor Manufacturing Ltd, the third-biggest maker of chips to other's designs. It's likely to report a US$33 million first-quarter loss today, and, "the second quarter will be worse than the first," said Chua Wee Thia, an analyst at Vickers Ballas Investment Research Pte.
Granted, it's not all bad news these days for the companies in Asia and around the world that make the brains that power everything from computers to mobile phones and, increasingly, make automobiles smarter. Take Intel Corp, the largest chipmaker: Its shares rose as much as 12 percent after its first-quarter sales beat reduced targets and the company provided a brighter-than-expected forecast.
Many investors hope rate cuts by central banks around the world will spur economic growth later this year, prompting improved demand for computers, telecommunication devices and consumer electronic chips. Analysts say the traditional high season of demand for electronics in the second half of the year may spur semiconductor purchases.
Judging by yesterday's markets, at least some investors are believers. In South Korea, Samsung Electronics Co, the world's biggest computer memory chipmaker, rose 8.9 percent to 233,000 won. Chartered Semiconductor rallied 9.2 percent, rising to S$4.76.
Not everyone is convinced. At Chartered Semiconductor, for example, its five biggest customers by sales -- Ericsson AB, Broadcom Corp, Conexant Systems Inc, Aligent Technologies Inc and STMicroelectronics NV -- have all either revised their sales or profit estimates or fired workers this year.
And STMicroelectronics, Europe's biggest chipmaker, said yesterday that a market slowdown is "likely to continue" through much of this year. The company reported first-quarter net income rose 43 percent to US$340.8 million, the low end of analyst expectations. Even at Samsung Electronics, company spokesman Chu Woosik pointed to a possible down side to the rate cut, saying that although it could boost demand, it also underscores just how weak the US economy already is.
Yesterday's Asian market rally "could be just a small blip in the continuing bear market," said Mark Mobius, managing director of Templeton Asset Management Ltd, who manages US$8 billion in investments. "We have to see some of the basic numbers change in terms of demand, particularly in the tech sector." In South Korea, officials are equally downhearted about prospects for a quick recovery. Today, the Korea International Trade Association plans to revive a telephone hotline that it hasn't used since the Asian financial crisis that stretched from 1997 to 1998.
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