But let's face it. These guys on Wall Street are fair weather friends. I for one believe investors and traders are expecting too much out of the semiconductor industry right now and will bail out quickly if sales and profits don't keep roaring back. But, hey, the chip business isn't sinking any more and is slowly turning around. Don't be greedy.

Is Intel lowballing forecast,
or will 2002 be mixed bag?

Intel did what it said it was going to do in the first quarter, but the chip giant took pains this week not to show too much optimism for the rest of the year. "We're not seeing any kind of recovery yet," says CFO Andy Bryant.

Is he lowballing us? Or does Intel feel like I do that the chip business will move up slowly in fits and starts this year. I'd guess a little of both.

Intel posted first-quarter sales of $6.8 billion, only a 3% drop from the previous quarter and a 2% increase over the same period last year. This marks the first time the chip giant had topped sales in the year ago quarter in four quarters. That's certainly good news.

First-quarter earnings, excluding acquisition-related costs, amounted to 15 cents per share, or what Intel had predicted. The chip maker also was expected to earn 15 cents a share by analysts surveyed by Thomson Financial/First Call.

Total net income added up to $936 million, up 86% sequentially and 93% over the year-ago period. But be careful--much of that big improvement was due to a change in accounting standards.

Barrett says main markets
still hit by weak spending

Intel doesn't seem to be expecting any explosion in the chip business this year. "While demand in emerging markets remains solid, established markets such as the United States and Europe continue to be impacted by weak information technology spending," comments CEO Craig Barrett.

"We are planning for a seasonal pattern for the second half of the year," adds COO Paul Otellini.

But the company does expect to expand its chip market by making its long-awaited entry into chip set market. The so-called 845G integrated chip set will be introduced this quarter, Otellini says.

Intel projects its second-quarter sales to range between $6.4- and $7-billion--anywhere from a drop of 5% to a rise of 3% from the previous quarter. That gives them plenty of room.

The first quarter was a mixed bag for Intel. Growth was flat in its core microprocessor business vs. the previous quarter. The desktop processor market was soft, but the company benefited from a "very good quarter in mobile and servers," says Otellini. Flash memory market was weak, but sales of Ethernet-based products were up in the quarter, he says.

(See April 16 story.)

Moto Semi reports big loss,
lower sales in 1st quarter . . .

Motorola tried to make a silk purse out of a sow's ear with its first-quarter report, but it didn't quite make it. Both the corporation and its semiconductor operation had another quarter they'd rather forget.

Moto's first-quarter sales fell to $6 billion, down from sales of $7.3 billion in the previous quarter. But its net losses did shrink--from $1.2 billion in the fourth quarter to $174 million in the first quarter. Those are still big numbers.

Motorola Semiconductor had first-quarter revenues of $1.09 billion, down 2.7% from the previous quarter but 26% below the year-ago period. Operating losses were still running big time, totaling $226 million in the first quarter, up from a loss of $95 million in the year-ago quarter. The chip unit reported an operating loss of $335 million in the fourth quarter.

There was one bit of good news. Semiconductor orders grew 30% sequentially to $1.3 billion in the first quarter.

(See April 16 story.)

. . . as parent expects lower sales,
6th straight loss in 2nd quarter

COO Edward Breen acknowledges the company will post its sixth consecutive quarterly loss in the second quarter, but maintains it will turn a profit in the third quarter. Of course, that prediction comes with the usual caveat: no new economic setbacks or major global major political problems. We'll see.

Second quarter sales will decline once again to between $6.3 billion and $6.4 billion vs. the year-ago quarter. Operating losses will be reduced to 4 cents a share, he says.

"We are making solid progress in repositioning Motorola to return to profitability in the second half of this year as our end markets recover," insists Breen. "We have demonstrated the ability to lower our break-even sales level, which is now reduced by more than 20% from its peak in 2000."

Motorola Semiconductor is still aiming to cut its employment to less than 24,000 by the end of this year, down from a headcount of 28,500 at the end of the first quarter. The group is moving ahead with plans to reduce its number of wafer fabs to 8 from 18 in 2000. But it is still operating 14 wafer fabs.

Capital spending for semiconductors has been kicked up a bit to $250 million this year from January's $200 million target, but that's still significantly less than the $610 million it spent in 2001 and the $2.4 billion in 2000 capital spending.

(See April 17 story.)

This kind of profit reminds me
of good old days in DRAM biz

Don't knock the DRAM! Sometimes it can make you tons of money! At a time when most chip makers would be happy to be making any profits at all, Samsung Electronics reported record quarterly net income of $1.45 billion for the first quarter--up eight-fold from the previous quarter!

Sales weren't too shabby either. The South Korean giant had quarterly sales of $7.6 billion, a 17% increase from the previous quarter.

Its semiconductor unit had sales of $2.28 billion and $760 million in operating profits. Sounds like the good old days of DRAMs.

The strong showing was attributed to mostly rising DRAM prices, but helping were high-growth rates for NAND flash memory, a supply shortage of active matrix LCD panels, and a stable system-on-chip business.

(See April 19 story.)

AMD first quarter is
better than expected . . .

Advanced Micro Devices came in better than expected with its first quarter results, but Wall Street didn't like its short-term outlook for microprocessor sales and the stock took a beating this week.

AMD lost $9.2 million, or 3 cents a share--analysts had expected a loss of 6 cents a share. Net totaled $124.8 million in the year-ago quarter. Revenues totaled $902 million, almost exactly what the Street had expected, but off 5% from the previous quarter and down 24% from $1.2 billion in the first 2001 quarter.

As always, AMD was upbeat to investors by its first quarter results. "We believe AMD grew unit market share in PC processors," says CEO Jerry Sanders.

AMD's conversion to 130-nm (0.13-micron) technology is "going extremely well," he says. "We now expect to complete the transition to 100% of PC processor production on 130-nm technology ahead of our previously announced year-end timetable."

PC processor sales were 3% higher than the year-ago quarter. They amounted to $684 million in the first quarter, a 3% sequential decline from $703 million in the fourth quarter, which was partly due to seasonal factors.

But sales of memory products, mostly flash memory, was another story. They continued to be weak, dropping 18.4% from the fourth quarter last year to $160 million in the first quarter.

. . . but chip maker sees
short-term blahs ahead

Don't look for the second quarter at Advanced Micro Devices to show any improvement. AMD predicts sales will continue to slip sequentially because of seasonal trends in PCs, uncertainty in flash memory markets, and tough pricing competition with Intel.

As a result, second-quarter sales are expected to decline slightly from the first quarter to a range of $900-to-$820 million. The chip maker will make money at the high end, but will lose money at the low end of this sales estimate. PC processor unit sales in the second quarter will show a decline in the 5-to-10% range.

Nevertheless, Jerry claims the "flash crash is now behind us." He points out that for the second consecutive quarter shipments in both units and bits increased. "Bookings for flash memory products improved over the prior quarter, and visibility is improving."

(See April 17 story.)

I'll miss Jerry Sanders;
Will AMD miss him too?

AMD isn't going to be as exciting or as much fun to follow now that its flamboyant founder is pulling out of the day-to-day. Well, at least he says he is. I've known Jerry Sanders for more than 30 years and while you might quarrel with his style, I believe that it was his leadership that turned AMD the only chip maker in the world to compete successfully with Big Daddy Intel in microprocessors. And I can't help but wonder if this makes AMD any less of a competitor in the future.

This week Jerry presided over his last quarterly report. He turns over the day-to-day running of his company next week to Hector de J. Ruiz, who Jerry recruited from Motorola Semi two years ago to be his successor as CEO. But the two men are very different in style. Ruiz is more your "techie" manager, though a good one.

A consummate salesman who favors Rolls Royces and custom-tailored suits, Jerry started AMD in 1969 as a "second source" to companies like Intel. He was and still is a fighter. Intel became "the enemy" in a hard-fought battle that's still going on fiercely for the global microprocessor business. Together, the two companies have nearly all the global market.

Sanders officially will remain AMD chairman until next year, but some observers, like me, don't expect him to fade away anytime soon. AMD has been Jerry's baby too long for a complete hands-on- manager like him not to stay closely involved in running his company.

Philips reports sequential rise
in sales, lower operating loss

Philips Semiconductors was part of the good industry news coming out this week. Not that its chip sales were booming once again, but at least that the horrible sales decline was ending.

Semiconductor sales for the first quarter of 2002 amounted to $891 million, a 29% decline from the year-ago period, but a 7% sequential jump from the previous quarter. The chip unit sees the global chip market improving, as its overall fab utilization rate climbed to 50% during the quarter.

Its operating loss went down from the previous quarter as well. Philips Semi reported an operating loss of $91 million, which was less than half of its fourth quarter loss of $254 million. But a year ago, the chip unit earned a profit of $204 million.

Overall, Royal Philips Electronics, the parent company, reported sales of $6.7 billion in the first quarter of 2002, a 7.3% decline from the year-ago period and an 18.3% drop from the previous quarter. And it managed to get back in the black by reporting a quarterly profit of $7.9 million vs. a $957 million loss in the previous quarter. Philips reported a profit of $82.1 million for the same quarter last year.

(See April 16 story.)

Conexant expects growing
sales and decreasing losses

Looks like Conexant Systems was able to get up off the floor in the first quarter.

"Second fiscal quarter performance exceeded expectations on both the top and bottom lines," says CEO Dwight W. Decker. He says the company had sequential growth in all three of its businesses in the second fiscal quarter ended March 29, "a period that is traditionally weak for our addressed markets."

Revenues hit $241 million for the quarter, up 5% over the previous quarter. Mindspeed Technologies, an Internet infrastructure business, grew 34% the company had expected a 10% rise, and its wireless communications and broadband access businesses both increased their sales 3% sequentially.

Conexant is still losing a major chunk of money, but the quarterly loss is getting smaller. Losses for the March 29 quarter, excluding amortization of intangible assets and special charges, were $88.3 million, an improvement of $19.4 million over the net loss of $107.7 million in the prior quarter. Losses including special charges hit $200.7 million, about the same as the previous quarter but down from the $262 million it lost in the year-ago quarter.

The current quarter also is looking better. "Following our solid performance in a seasonally weak March quarter, we expect all three Conexant businesses to again grow sequentially," Decker predicts. "We expect Conexant's third fiscal quarter revenues overall to grow 3-to-5% sequentially."

(See April 17 story.)

On Semiconductor still in red,
but second quarter looks better

Major cost cutting is beginning to pay off for On Semiconductor.

The Motorola Semi spin-off reported slightly better-than-expected revenues of $269.1 million for the first quarter, a sequential increase of 0.8% over the previous quarter. It had been projecting revenues to be flat to down slightly sequentially in the first quarter.

Including restructuring charges, On Semiconductor posted a net loss of $50 million, or $0.30 per share, in the first quarter vs. a net loss of $450.9 million in Q4, which included non-recurring charges of $367 million.

The Phoenix chip maker had a pro forma net loss, excluding restructuring charges, of $43 million, or 26 cents per share, in the first quarter. This beat the Wall Street consensus by a nickel a share.

On Semiconductor says it is still on track with its cost-cutting to save $360 million on an annual basis by the end of 2002. It also is benefiting from improved market conditions. "The market continues to provide us with strong indications of stabilization," believes CEO Steve Hanson. Backlog at the end of the quarter amounted to $223 million,, up more than 10% from the end of the year.

"We anticipate total revenues to be between $270 and $275 million in the second quarter with gross margins increasing to 25-to-27% and operating expenses remaining flat to slightly down from the first quarter," Hanson says. At these revenue and expense levels, he expects to reduce the loss per share in the second quarter to 20- to 24-cents. EBITDA is expected to be in the range of $45-$50 million, he adds.

(See April 17 story.)

Kulicke & Soffa looking
for strong sales growth

Orders are beginning to strengthen for the world's largest backend chip-assembly tool company. Kulicke & Soffa Industries is predicting strong growth in the quarter ending June 30. It figures quarterly revenues will grow sequentially by 22-to-31%, or to a range of $130-to-$140 million.

"The worst of this severe business cycle appears to be behind us, with recent business activity being markedly robust," says CEO Scott Kulicke. "Recent ordering patterns have been quite encouraging leading us to be more optimistic about a cyclical recovery," he says.

K&S reported a 3.6% sequential increase in revenues to $106.9 million for the quarter ended March 31.

But losses were higher. The company posted a quarterly net loss of $43.6 million, which includes $29.5 million of one-time charges for inventory write-offs, asset impairment, discontinuance of a product, restructuring, and the relocation of manufacturing facilities to Asia. The Willow Grove, Penn., company had a net loss of $17.5 million in the prior quarter and a net loss of $11.7 million in the year-ago quarter.

Net bookings in the March 31 quarter increased 27% sequentially to $126 million from $99 million in the prior quarter. This is double K&S's net bookings of a year ago.

(See April 18 story.)

Nokia backs off its
cell phone forecast

Don't look for much of an increase in unit sales in the cellular phone market this year. Nokia, which was one of the last holdouts predicting significant growth this year, has backed off a forecast that had looked to many observers as being too optimistic a forecast for cell phone sales this year.

The Finnish giant now says that it expects worldwide handset sales to run between 400- and 420-million units this year, trimming 20 million off its previous forecast of between 420- and 440-million phones. Around 400 million phones were sold worldwide in 2001, according to Dataquest.

Nokia was "a bit optimistic, especially for smart phones," says Sarah Kim, analyst for the Yankee Group. "Many handset makers expected the numbers to be higher, especially for replacement rates," she says, "but we are still recovering in the consumers market which hasn't really picked up."

(See April 18 story.)

LSI Logic tries new strategy
in launching new 90-nm line

In one of the first tests of a new strategy for big U.S. Integrated Device Manufacturers, LSI Logic will use Taiwan Semiconductor's state-of-the-art 90-nm process technology to become one of the world's first IC suppliers to provide ASICs, application-specific standard ICs, and systems-on-chips.

This week LSI Logic trotted out its new ASIC and SoC product portfolio based on 90-nm (0.09-micron) process technology. The G90 rollout includes the process technology, IC building blocks, and design tools to enable customers to develop 90-nm chip designs.

LSI Logic figures the market is ripe for the new 90-nm ASIC and SoC designs, even though it is still ramping up production of ICs based on its own, 130-nm (0.13-micron) process technology, which is based on new TSMC technologies.

The Silicon Valley company plans to deliver 90-nm ASIC/SoC prototypes in the first quarter of 2003, with production slated in the second quarter of next year.

Other ASIC/SoC vendors, such as IBM, Fujitsu, NEC, and STMicroelectronics, are in the race as well and some of them NEC, Motorola, Philips, and STMicro are working with TSMC at the 90-nm node.

LSI Logic's G90 push is expected by analysts to bolster its overall position in the market. The company was the world's third largest supplier in the ASIC/programmable logic device (PLD) market, according to Dataquest.

(See April 15 story.)

TSMC and UMC are
TI's foundry partners

Texas Instruments is another big U.S. Integrated Device Manufacturers that is swinging to a new production strategy for next generation products. TI has struck strategic foundry agreements with two Taiwanese foundries-Taiwan Semiconductor and United Microelectronics--for the foundries to start building the chips this summer using TI's 0.13-micron copper processes.

Following that, TI intends to qualify its next-generation 90-nm (0.09-micron) process at the two foundries, so they can move into volume production in the next couple of years.

The shift is part of TI's new plan to lower capital expenditure expenses in the future and to shift a portion of its leading-edge IC products to TSMC and UMC. TI indicated the percentage of its products produced by third-party fabs could reach 20% from the current 10% level.

TI believes that shifting production outside the company should enable it to improve operating results. TI already has reduced its capital spending this year to $800 million from $1.8 billion last year and has set al goal of raising its operating margins to the 30% range compared to just under 25% at the peak of the last boom cycle in 2000.

TI's partnership with TSMC and UMC appears to be much different than those alliances between the two foundry giants and other IDMs. TI will use its own copper-based CMOS processes in TSMC and UMC frontend lines, while other chip makers have struck development partnerships to either "align" their processes with those foundries or jointly create new technologies.

Dallas-based TI intends to use its own process technology in strategic foundry agreements so that its IC development teams can tweak performance and take advantage of the company's R&D.

(See April 15 story.)

TI chip sales moving
back into growth phase

Texas Instruments is on its back up. "We have turned the corner toward growth," says CEO Tom Engibous. "TI's shipments, affected by liquidation of excess inventory in 2001, are accelerating as they catch up to the rate of our customers' shipments."

The Dallas chip maker this week reported a 2% sequential increase in revenues to $1.83 billion in the first quarter, with half of this growth combing from semiconductor shipments. TI now expects its revenues to increase 10% sequentially in the second quarter.

TI also was able to stem its losses, showing a net loss of $38 million in the first quarter, only a third of the loss it reported in the previous quarter. Net income hit $230 million in the same quarter a year ago.

Semiconductor revenues totaled $1.52 billion in the first quarter, up 2% from a little less than $1.5 billion in the fourth quarter. The gains came from higher analog and digital signal processor shipments. TI's semiconductor business posted a loss of $27 million vs. a profit of $304 million in the year-ago quarter.

TI's analog revenues were up 8% sequentially but down 32% from the same quarter last year. DSP revenues rose 7% sequentially, but were 9% below the same period last year.

Semiconductor orders were up 18% sequentially and up 2% from the same period last year. Inventory corrections have been completed by most customers, according to TI, especially by the wireless handset makers hit hard by the 2001 downturn. And after several quarters of severe price declines in commodity analog products, TI has seen some price stability.

(See April 15 story.)

Chartered's first-quarter results
confirm foundry industry uptick

Chartered Semiconductor Manufacturing, world's third largest silicon foundry, confirmed the resurgence of the foundry business. The Singapore chip maker reported on Friday a stronger-than-expected 11% sequential increase in its first quarter revenues. The second quarter will be even better, the company says, predicting that sales will jump 25% over the first quarter.

"During the past six weeks, we have seen growing indications from our customer base that the semiconductor industry recovery is beginning to accelerate," comments CEO Barry Waite. "We see improvement in orders across all of the market segments we serve and across a wide range of customers, particularly those in communications." And Chartered is putting its money where its mouth is. It has expanded its capital spending plan from $400- to $500-million. It has also decided to accelerate the start up of its 300-mm wafer plant by three months, with initial production in Fab 7 now slated to begin by the third quarter of 2003. Earlier this year, Chartered indicated that it had pushed back the start up to the end of 2003.

First quarter revenues reached $84.4 million, up from $76.1 million in the previous quarter. Net losses for the period hit $128.4 million, just about the same as the previous quarter. It was better than Chartered's guidance by a nickel a share.

"Chartered is off to a good start in 2002, as finished wafer shipments in the first quarter were up over 25% from the third-quarter 2001 trough," Waite notes. "We have set our sights on a target to achieve a fourth-quarter 2002 revenue run-rate of at least double that of first quarter 2002," he adds.

(See April 18 story.)

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