NEW YORK — The semiconductor industry will rebound in the fourth quarter of this year, but price pressure on components will remain fierce until the middle of next year when supply and demand come into balance, predicted Pasquale Pistorio, president and chief executive of STMicroelectronics NV, during an editor's roundtable discussion held in New York Tuesday (July 24).
"For semiconductors, I think the bottom is the third quarter, and we will see a bounce back in the fourth quarter," said Pistorio. "There will still be excess capacity in the industry, so price pressure will continue to be strong," he added.
Pistorio based his forecast on reports that excess inventories are diminishing for products such as cellular phones. In addition, "The indications our customers are giving us is that they want more products in the fourth quarter than in the third quarter, and we are assuming they have reasonable visibility by now," Pistorio said.
STMicro is known for being a highly diversified supplier of semiconductors to the communications, consumer, automotive and computer peripheral markets. "We are very pleased with our portfolio from a strategic perspective," said Pistorio. Although STMicro has as much as $2 billion in reserves, the company is not currently planning to take advantage of the down market for any acquisitions, he added.
The company continues to look for ways to trim costs until an upturn hits. STMicro closed a Singapore fab for three weeks in June and will shut a discretes factory temporarily. The company has also trimmed 1,500 employees by attrition and layoffs, closed a fab in Ottawa and made some cuts to its R&D budgets.
"The secret in these things is to respond to the need to cut costs now without impacting long-term strengths," said Pistorio. "It's a lot easier for a CEO to send out a memo about a flat 10 percent cut, but it's not the best thing to do for the future of the company."
Despite the downturn, Pistorio claims STMicro's market share in flash memories jumped to 9.5 percent in the second calendar quarter, up from 6.4 percent at the end of 2000 and 4.8 percent in the final quarter of 1999. He attributed the leap to the relatively small die size and low cost structure for STMicro's flash products as well as 10 long-term flash contracts that the company signed with large users last year.
"We are aiming to be the number-three supplier in flash by the end of this year or early next year," Pistorio said.
