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Analogue suffers as chipmaker lowers Q4

Posted: 12 Nov 2008     Print Version  Bookmark and Share

Keywords:analogue-chip makers  IC downturn  4Q revenues 

Fairchild Semiconductor Inc. is the latest chip maker to cut its forecast amid the IC downturn.

In fact, analogue-chip makers like Fairchild are taking it on the chin right now. On Monday (Nov. 10), Fairchild said revenue for the fourth quarter of 2008 is now projected to be between Rs.1,691.23 crore to Rs.1,801.31 crore ($338-to-$360 million), a sequential decline of 16-to-21 per cent from the third quarter. Previous guidance, given as part of the company's Q3 2008 earnings release, was for a sequential sales decline of 6-to-12 per cent.

''So far in the analogue/discrete space, Linear guided 4Q revenues to fall 10 per cent to 20 per cent quarter-over-quarter, Maxim guided 4Q revenues to fall 5 per cent quarter-over-quarter, and Fairchild guided 4Q revenues to fall'' 16 per cent to 21 per cent sequentially, said Craig Berger, an analyst from FBR, in a report.

Texas Instruments Inc.'s Q4 sales are projected to fall 10 per cent. In a recent and separate report, Berger also cut the estimates for National Semiconductor Corp., which is set to release its results soon.

''We believe the (National's) calendar 4Q revenue guidance of plus 1 per cent to minus 3 per cent quarter-over-over is stale and does not incorporate the significant demand deterioration that has since occurred,'' he said. ''For 4Q, we forecast National's revenues to decline 4 per cent sequentially to Rs.2,236.63 crore ($447 million), below the Street estimate of Rs.2,341.70 crore ($468 million).''

Indeed, it's a tough time for the analogue sector, which has been solid until now. ''This suggests that 4Q guidance could be worse than we previewed for many other analogue/discrete firms, as business conditions have deteriorated in recent weeks,'' he said.

There is some good—and bad—news. ''In recent weeks, it has become increasingly clear that Asian distributors are depleting chip inventories below sustainable levels in order to hoard cash as many Asian banks are not actively lending right now,'' he said.

''This inventory-to-cash conversion process makes December-quarter visibility poor and revenue guidance weak. Given that many chip firms are seeing peak to trough revenue compression of 20 per cent or more through 1Q '09, we think it is possible chip firms could be setting up for a 2Q revenue snap-back as customers replenish inventories,'' he added.

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