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Intel chip shortage hurting market, says analyst

Peter Clarke
(12/02/2005 8:14 AM EST)
URL: http://www.eetimes.com/showArticle.jhtml?articleID=174900043

LONDON — A shortage of Intel peripheral logic chips may have caused the global semiconductor market to come in below expectations in October according to Bruce Diesen, strategist with Handelsbanken Capital Markets.

As the Intel chipset shortage is not predicted to end soon it looks set to limit market growth for months to come and could leave notebook computers in short supply in the run up to Christmas.

Despite achieving record-breaking three-month average revenues in October of $20.05 billion, the global semiconductor market was below a previous prediction of $20.3 billion and the averaging effect hides an even more severe miss in October’s actual sales, according to Diesen.

“Actual world chip sales rose 5.5 percent year-on-year in October, below expectations of a 9 percent year-on-year gain,” he said. “There was a big slowdown in shipments of notebook PC processors, probably due to a chipset shortage at Intel,” he observed.

Intel’s peripheral logic chip set shortage has been going on for some time and is expected last into the first-half of 2006, according to Andy Bryant, the company’s chief financial officer.

The inability to produce enough peripheral logic chips eventually limits the manufacture of notebook computers and thereby hits the industry’s processor revenues as well. Although other companies make peripheral logic chip sets the complexity of marrying them up with particular processors, bus formats, clock speeds, package types and supply chain logistics means that they also find it difficult to drop into sockets waiting for Intel chips.

In a note sent to investors to discuss October’s global semiconductor figures, Diesen noted that processor sales at both Intel and Advanced Micro Devices Inc. plunged in October. He also observed that processor average selling prices (ASPs) fell from $110 to the middle of the $80 to $90 range, indicating that Intel had trouble delivering notebook processors.

While chip deliveries and prices were down production of PCs in China in October was strong, Diesen said, indicating that the Chinese would have drawn down existing processor inventories. “October is a heck of a time to have a chipset shortage,” he commented.

Diesen said that although October sales of chips for mobile handsets were in similar quantities to those in September there was either a shift in mix towards low end DSP, contrary to the normal seasonal upshift, or that the mix shift occurred but Texas Instruments, the largest vendor of DSPs, was forced to cut prices. Meanwhile NAND flash memory chips sold strongly, Diesen said.

“We keep our chip sales forecast at 7 percent growth for 2005 and 8 percent annual growth for 2006, but see a risk that Intel's mid-quarter guidance next week could disappoint the market,” he added.


Consumers drove $20-billion October, says SIA

Peter Clarke
(12/02/2005 7:05 AM EST)
URL: http://www.eetimes.com/showArticle.jhtml?articleID=174900035

LONDON — A strong rebound in consumer confidence drove the three-month average of worldwide semiconductor sales in October to $20.05 billion, a record figure and up 2.5 percent sequentially from the $19.55 billion reported for September and up 6.75 percent from the $18.78 billion reported for October 2004, according to World Semiconductor Trade Statistics (WSTS) figures.

The WSTS numbers were published by the U.S. Semiconductor Industry Association (SIA) and the European Semiconductor Industry Association (ESIA). The SIA and other regional industry groups publicize sales statistics gathered by WSTS as the three-month moving averages of monthly sales activity, rather than the actual numbers. The SIA says it calculates averages to smooth out variations due to companies' sales reporting calendars, which often make March, June, September and December five-week months thereby inflating those month's numbers.

“Strong demand for consumer electronics drove worldwide chip sales over $20 billion in October,” said SIA president George Scalise, in a statement.

“A sharp rebound in consumer confidence was reflected in strong sales of a broad range of consumer products, such as cell phones, MP3 players, digital cameras, digital TVs, and personal computers.” Scalise noted that demand for semiconductors was strong in all industry sectors, noting that all of the semiconductor product lines tracked by SIA saw sequential sales increases in October.

“Industry sales continue to track with our forecast of 6.8 percent growth to $228 billion in 2005. Inventories are in balance, and production capacity utilization remains in the healthy 90 percent range,” Scalise concluded.

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