Alexa
  • Directory of Taiwan

Chip stocks dive in 2008 as demand, prices slide

Chip stocks dive in 2008 as demand, prices slide

The semiconductor industry, notoriously volatile even without the shock of a global economic downturn, was badly hurt in 2008 as prices for memory chips continued their dizzyingly rapid fall and demand for PC microprocessors dropped off amid weaker demand.
As such, shares of chip makers and companies serving the sector suffered during the year. The Philadelphia Semiconductor Sector index, which is comprised of chip companies as well as manufacturers of chip-making equipment, fell by nearly half in 2008. The index closed Wednesday's trading session at 211.26, compared with 408.04 at the end of 2007. The Dow Jones Total Market Index fell 39 percent for the year.
"Things have been horrible all year and will continue to be horrible for the time being," said Avi Cohen, managing partner with Avian Securities.
Even Intel Corp., which has performed relatively well this year, was punished in the stock market. The world's biggest microprocessor maker recorded $5.1 billion in net income in the first nine months of 2008, up 7.5 percent from the previous year as it benefited from an improved manufacturing process and market-share gains.
But the tech bellwether's shares lost about 45 percent of their value in 2008. A steep decline began in September as the financial sector crisis intensified. Additionally, a $1 billion reduction to Intel's fourth-quarter revenue forecast in November did little to inspire investor confidence.
Shares of Intel's main rival Advanced Micro Devices Inc. fared even worse, despite a turnaround plan that includes spinning off its factories into a joint venture and shedding 2,100 jobs. Furthermore, in July the company's embattled chief executive Hector Ruiz stepped aside and was replaced by President and Chief Operating Officer Dirk Meyer.
AMD's stock is trading at a multi-decade low of around $2 per share, down about 71 percent for the year.
Job cuts were spread throughout the sector. KLA-Tencor Corp. and Applied Materials Inc., two of the world's biggest makers of chip-making equipment, are cutting 900 jobs and 2,800 jobs, respectively. Texas Instruments Inc. is slashing 650 jobs from the division that makes chips for cell phones. National Semiconductor Corp. is cutting 330 jobs.
In 2008, shares of KLA-Tencor and Texas Instruments lost more than half their value. Applied Materials fell about 43 percent.
No relief is expected for 2009. The Semiconductor Industry Association recently forecast chip sales will fall by more than 5 percent to $247 billion next year before recovering in 2010.
The most problematic area of the semiconductor market has been memory chips. Inventory oversupply sent memory chip prices tumbling even before the financial meltdown hit, and many manufacturers are absorbing deep losses and plummeting share prices. Additionally, lower sales of digital cameras and other gadgets that use flash memory are hurting demand.
Market researcher iSuppli Corp. called the memory market "disastrous" and forecast devastating sales declines for some of the world's biggest chip makers.
Shares of two of the largest memory chip manufacturers, SanDisk Corp. and Micron Technology Inc., have fallen 71 percent and 64 percent for the year, respectively. U.S.-traded shares of Germany-based competitors Qimonda AG fell 95 percent and shares of Infineon Technologies AG have lost 88 percent of their value in 2008.
Chip revenue at Micron and Samsung Electronics Co., the world's biggest memory chip maker, should fall 9 percent in 2009, according to iSuppli.


Updated : 2021-05-10 00:34 GMT+08:00