Better outlook for semiconductor industry

It does look as though the semiconductor industry is picking up, with the past week seeing a string of positive news on the industry.

On 8 June, the US Semiconductor Industry Association (SIA) reported that global semiconductor sales are expected to rise by 6 percent in 2005 to a record $226 billion, more than previously forecast, driven by demand for personal computers and mobile phones. The association also projected a compound annual growth rate of 9.8 percent through 2008.

Excess inventories seem to be a diminishing concern. "By the end of the first quarter of this year, excess inventories had been largely worked off and are no longer a factor in our outlook," George Scalise, president of the SIA, was quoted as saying.

These optimistic projections appear to be backed up by corporate forecasts last week.

Texas Instruments raised its second-quarter earnings forecast from a range of 25 cents to 29 cents a share to 27 cents to 30 cents per share, while its revenue target was raised from a range of $3 billion to $3.24 billion to a range of to $3.12 billion to $3.24 billion. Rising demand for its wide array of microchips that power cell phone, communication products and entertainment systems is expected to feed these increases. Further, it said that excess inventory, which had weighed on revenue in recent quarters, had been cleared.

Taiwan Semiconductor Manufacturing, the world's top contract microchip maker, raised its forecast for shipments to an increase of 11 to 13 percent from the first quarter and its estimate for gross profit margins to about 40 percent, the high end of its previous 38-40 percent estimate. It's main competitor, United Microelectronics, had earlier reported a 1.6 percent rise in sales for May from April.

Intel, the world's largest chip maker, raised its revenue and profit margin forecast for the second quarter, citing strong demand for its Centrino notebook computer chips. Its sales target was raised to $9.1 billion to $9.3 billion from $8.6 billion to $9.2 billion in April, while quarterly gross margins was raised from 56 percent to 57 percent.

Intel's rival, Advanced Micro Devices, also said last week that demand for the chip maker's products is "robust" across the board.

National Semiconductor, a maker of chips that control power consumption in electronics, reported that earnings in its fiscal fourth quarter rose to $132.1million from $94.2 million a year earlier and reported that orders for new chips rose 12 percent from the previous quarter.

LSI Logic, a maker of microchips used in data storage devices, raised its revenue forecast for the second quarter to a range of $465 million to $475 million from its previous estimate of $450 million to $465 million. It cited better-than-expected growth in its DVD recorder products as a reason for the improved estimate.

And in a further sign of bullishness for the industry's future, Semiconductor Equipment and Materials International reported on 9 June that China is expected to build 20 new semiconductor fabrication plants over the next four years.