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| Rear
View Mirror "Sign of life in communications?" Chip sales in first quarter were nothing to write home about. Sequentially they were down over 3%. And while year-over-year they were up 13%, annual growth is slowing and was down to 8% in March (Chart 1). |
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Chip sales ultimately follow the demand for end equipment and this was mixed in the US in first quarter. Consumers, who were the only source of strong electronic equipment growth in 2002, went on vacation in first quarter and bought no more than last year. Corporations did better. Computer purchases were up a healthy 7% from last year, though their growth trajectory is slowing. The big surprise was demand for communications growing 2% from first quarter 2002 (Chart 2);the last time communications equipment demand rose, year-over-year, was in fourth quarter 2000 (remember those halcyon days?). This rise flies in the face of corporate spending surveys and analysts' forecasts, which predict another down year for communications. Of course, history is no predictor and we have to wait for the year to unfold further, but there seems to be life in this parrot. |
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Crystal
Ball Following the lackluster first quarter, analysts have been lowering their chip growth forecasts (Chart 3). The non-broker analyst consensus still seems too high at 13%. The broker analyst consensus is a more credible 9%. But, with annual growth having slowed to 8% in March, even reaching 9% is going to need a good chip demand bounce in the second half of the year. This bounce is built into the the analysts' forecasts - growth in third and fourth quarters will have to exceed both the 5-year and 10-year averages to deliver 9% for the year. |
| Maybe these expectations will
be rescued by further un-forecasted improvements in communications demand?
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¡@
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Analyst
SC sequential
growth consensus |
5-yr average
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10-yr average
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2Q
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1.4%
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-1.6%
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2.6%
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3Q
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6%
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4.6%
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5.1%
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4Q
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7%
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5.1%
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4.5%
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| Advantage
Foundry "Stay pure" |
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Challenged with
the opposing forces of a weak IC market and the revenues needed to fill
their fabs
($6 billion in IC revenues for a 300mm fab), some companies are struggling to survive. One foundry is forging exclusive relationships with selected customers, to the detriment of those refusing to play their game. Don't get caught on the losers' side. And some integrated IC vendors are turning to opportunistic foundry sales to help fill their capacity. Beware! These vendors are not committed to the dedicated foundry business - the pure foundry's interests are in full harmony with its customers' and they succeed together, not so with the IDM foundry. |
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