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Chipmakers may suffer in Q4, IC Insights says

Chipmakers may suffer in Q4, IC Insights says

Texas Instruments Inc. and other chipmakers may face oversupply next quarter because of rising inventories of semiconductors that go into consumer products 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., the top two producers in the US$213 billion semiconductor industry, for better-than-expected demand. Texas Instruments, the world's No. 3 chipmaker, and National Semiconductor Corp. have also said this month orders are exceeding their internal 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."

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

In Asia, chipmaker shares fell, dragging Morgan Stanley Capital International's Asia-Pacific index lower. Taiwan Semiconductor Manufacturing Co., the world's largest producer of made-to-order chips, fell 1.9 percent to NT$52.90 at 12:20 p.m. in Taipei. Samsung Electronics, the world's largest memory chipmaker, fell 2 percent to 595,000 won in Seoul.

Optimism

Andy Bryant, chief financial officer of Santa Clara, California-based Intel, whose chips power more than 80 percent of the world's personal computers, said on September 8 that the company's seeing "healthy growth" in global computer demand.

The same day, Ron Slaymaker, vice president of investor relations at Dallas-based Texas Instruments told analysts that the company's customers are "bullish" about demand for the holiday season and National Semiconductor's Chief Executive Brian Halla said his clients were telling him mobile phone and television demand would be "strong" until the end of the year.

Hwang Chang Gyu, head of the semiconductor business at Suwon, South Korea-based Samsung Electronics, Asia's largest technology company by market value, said this week he expects the company to post record sales during the third and fourth quarters, fueled by demand for so-called NAND flash memory chips that store songs and pictures in products such as digital cameras and MP3 players.

Katrina

Samsung's Hwang and Texas Instruments' Slaymaker also said they weren't noticing negative impacts on demand because of Katrina, the most expensive natural disaster in U.S. history. Katrina has prompted economists at brokerages such as Lehman Brothers Inc. and Goldman Sachs Group Inc. to cut their forecasts for U.S. economic growth in the current quarter.

"If the overall U.S. economy slows and it's right during the holiday season, there's going to be less digital cameras sold than expected and less big-screen TVs," McClean said. Katrina's "not a positive effect, it's a negative effect and everyone's scrambling to find out how negative."