FSI International is now a company that almost no one follows. But the latest results from the tiny Minneapolis-based semiconductor equipment firm offer a sobering snapshot of conditions in the industry.
Chip stocks are suddenly on a ferocious tear: the SMH, the semiconductor HOLDRs, have rallied 16 percent in six days. There’s a spreading view that semiconductor demand may have hit bottom.
But not everyone is convinced.
Auriga USA analyst Daniel Berenbaum this morning asserted in a research note that “the recent rush to call the bottom in semiconductor stocks is based largely on supply-side data that effectively ignores continued deterioration in demand.” Berenbaum thinks the SOX, the widely tracked semiconductor stock index, will eventually return to its November lows in the 170 range.
Carl Johnson, an underappreciated observer of the tech investing world and a longtime analyst on the semiconductor equipment business, who can be found online at Infrastructure Wednesday afternoon, sent along an annotated version of a list of the Top 10 Tech Investing Rules, as set down in Institutional Investor magazine by J.P. Morgan chip analyst Christopher Danely.
Intel certainly isn’t immune to the downturn in the economy–a decline that both IDC and Gartner today said will result in a big dropoff in 2009 semiconductor industry revenue.
But Barclays Capital analyst Tim Luke today asserted that Intel might not be hurt quite as badly as some other chipmakers.
No part of the tech sector has been harder hit than semiconductor equipment stocks. Makes you wonder how many of the players will simply disappear.
Carl Johnson, who runs the industry research boutique, Infrastructure, points out a host of smaller players in trouble.
There’s kind of a pattern to today’s very large batch of earnings from the semiconductor and semi equipment companies. The Q4 numbers in most cases were well telegraphed; many companies in the sector had already pre-announced rotten results. Many have cut heads, are cutting heads, or will cut heads. And the guidance for the March quarter is generally for double-digit sequential revenue declines.
In a welcome instance of positivity, Glen Yeung of Citigroup advised this morning that now is the right time to invest in the chip and semiconductor sectors, asserting that now is the right time for it to jump in for the next upturn. He specifically called out Integrated Device Technology, Nvidia and STMicro as investment targets.
It’s been a rough day for highly leveraged semiconductor stocks.
In a research note this morning, Citigroup’s Glen Yeung provided a review of the credit liabilities of the chip companies Citi has under coverage. He notes that Advance Micro Devices (AMD), Spansion (SPSN), Infineon (IFX) and Qimonda (QI) all have debt coming due in the next 15 months.
In case you happen to think that Toshiba is going to outbid Samsung for SanDisk (SNDK), you ought to take note of the company’s currently grim view of the NAND flash memory market.
In fact, as Bloomberg reports, Toshiba today cut its full-year net income forecast for the March 31, 2009, fiscal year by 46 percent to 70 billion yen, which would be a four-year low.
Here’s a cheery item on the chip sector that I missed while I was off at this morning’s Apple (AAPL)-sponsored Jack Johnson concert in San Francisco. Christopher Danely, semiconductor analyst at J.P. Morgan, asserted in a research note this morning that “deteriorating demand will bring about a correction in semiconductor estimates and stocks over the next four to six weeks.”
At Intel Corp.’s big developer conference this week, the chip giant was extolling the virtues of its newest little chip, called the Atom. The Atom has surprised both company executives and analysts with its popularity among hardware makers. The chip was introduced in March and is aimed at an emerging market of very low-cost mobile devices, especially in developing countries.
In the latest indication of the deep downturn in the semiconductor capital equipment industry, Netherlands-based ASML Holding (ASML) warned that its 2008 revenues could be down 20 percent from 2007.
We often cover semiconductors that require less energy, but we rarely talk to the companies behind those chips to find out what else they might be doing to reduce their power consumption. However, Norm Fjeldheim, chief information officer for Qualcomm, recently shared a few tidbits about what the cellphone chip maker is doing to keep corporate consumption down–and it all starts with information technology (not everyone is jumping ship to build “cleantech” firms).
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