By Mark LaPedus, SemiMD senior editor

The first wave of financial results are out and the forecast for ICs is gloomy for the rest of the year and into 2012.

So far, Fairchild Semiconductor Inc. and Micron Technology Inc. have reported and each posted lackluster results. In the fab tool market, ASML Holding NV posted strong quarterly results, but the company said the outlook is unclear.

In total, some 20 chip makers have lowered their previous guidances amid lackluster demand and rising inventories in the supply chain. “Specifically, a number of semi related misses have been attributed to inventory draw downs in the industrial and telecomm end-markets,” said Hans Mosesmann, an analyst with Raymond James & Associates Inc., in a report.

“This compares to the PC supply chain, which has been reducing inventory for a number of quarters given the popularity of tablets and ongoing softness in consumer related spending,” he said.

Craig Berger, an analyst with FBR, said: “How long will this muted semiconductor downcycle last? Downstream supply chain inventory reductions will likely last through January or February, with fundamentals solidly improving from there.”

VLSI Research Inc. maintained its current forecasts in 2011, which calls for the IC industry to grow by 2.1 percent and the semiconductor equipment business to jump by 10 percent. For 2012, the IC market is expected to grow by 4.8 percent, but the fab tool business is expected to drop by a whopping 20.5 percent, according to VLSI Research.

The outlook appears to be shaky for fab tool makers in 2012. “Looking to 2012, (ASML) management highlighted this as a ‘solid technology migration’ year,” said C.J. Muse, an analyst with Barclays Capital. “Interestingly, they also suggested that the foundry segment will be a key determinant of how good/bad the year will be.”

Another key indicator for the remainder of the year and beyond is Intel Corp., which will report its results next week. Intel’s revenues are expected to be “near the low end” of its previous guidance, Muse said.

“We believe Intel continues to benefit from ongoing strength in emerging markets (particularly China) which accounts for half of Intel’s PC business and relative strength in servers driven by data center buildouts,” he said.

“Looking beyond the September quarter, checks out of Asia suggest order cuts have started to stabilize (partially due to inventory restocking ahead of China’s Golden Week) but visibility still remains low and so far we see no signs of a holiday pickup as customers remain cautious on building inventory ahead of what is expected to be a disappointing holiday season,” he said.

Another supplier, Microchip Technology Inc., also sees a slowdown. The chip maker sells microcontrollers and analog devices for automotive, industrial and other applications.

The firm said that it expects its net sales for its second quarter of fiscal 2012 ending Sept. 30, 2011, to be down about 9.1 percent sequentially. On August 4, 2011, Microchip provided guidance of net sales to be down sequentially by 1 percent to 6 percent.

Microchip also said that second quarter fiscal 2012 GAAP earnings per share is expected to be approximately 38 to 40 cents and non-GAAP earnings per share is expected to be approximately 45 to 47 cents. On August 4, 2011, Microchip provided guidance of GAAP EPS of 44 to 48 cents and non-GAAP EPS of 50 to 54 cents for the second quarter of fiscal 2012.

“Our net sales activity in the September quarter did not progress as we originally expected,” said Steve Sanghi, Microchip’s president and CEO.

“Entering the September quarter we anticipated that business conditions would continue to be impacted by weak, broad-based demand conditions, but would begin to improve towards the latter part of the quarter from the seasonal Christmas builds in Asia,’’ he said. “Instead we experienced incrementally stronger headwinds and saw no seasonal Christmas build, which in turn adversely impacted all of our product lines and sales channels. The overall global economic outlook continues to be poor and is adversely impacting our business as well as the rest of the semiconductor industry.”

It’s not all gloom and doom. Research firm Databeans Inc. forecasts that chips in automotive applications will experience a 9 percent compound annual growth rate over the next five years. This brings the current $25 billion market to about $40 billion in 2016, according to the firm.

The regional update for automotive electronics has Europe finishing the year with 32 percent of the revenue, followed by Japan and the Asia-Pacific region, according to the firm.

“Vehicle manufacturers are beginning to integrate infotainment devices, once only available in luxury cars, into most new vehicles,” said Brice Esplin, an analyst with the firm.

Databeans also sees the demand for electric vehicles and hybrids. “Currently, there are approximately two million electric vehicles and hybrids worldwide, compared to 64 million internal combustion vehicles,” Esplin said. “That equates to roughly three percent of the entire new automobile market consisting of electric and hybrid vehicles. That small percentage of EVs and HVs is expected to increase to more than 10 million, or about 14 percent of the total market, by the end of 2016.”

The automotive industry has also been favoring the sensors and MEMs segment due to new government regulations worldwide. “Many of these regulations mandate safety systems to monitor different aspects of a vehicle,” Esplin said.
“Revenue for the safety application segment of the automotive semiconductors is growing nine percent on average over the next five years. Airbags receive the largest revenue share in the sensors safety segment, with 40 percent and $429 million.’’

Tags: Intel, Microchip, Micron, Semiconductor

This entry was posted on Thursday, October 13th, 2011 at 11:03 pm and is filed under News Stories. You can follow any responses to this entry through the RSS 2.0 feed. You can leave a response, or trackback from your own site.