Updated throughout at 2:30 p.m. PST.
A crush of warnings are descending on Intel, AMD, and the PC industry this week.
First up, Avian Securities. The brokerage company said that PC makers "are being very conservative with their build plans for Q4."
Market researcher IDC is equally pessimistic. "The supply chain is telling us that there is strong concern for demand decline," according to Shane Rau, an analyst at IDC. He is cutting his processor forecast "probably into the low to mid single digits on a unit basis for total PC processor growth in the year 2009."
Investment bank Friedman Billings Ramsey (FBR) cut estimates for AMD and Intel on Tuesday. Like other analysts, FBR's Craig Berger cited signs of weakness for both notebook and motherboard manufacturers in Taiwan.
For Intel, FBR's fourth-quarter pro-forma earnings per share (EPS) estimate falls to 30 cents, from the previous estimate of 36 cents. The fourth-quarter revenue forecast is cut to $9.8 billion from $10.4 billion
For AMD, FBR now sees a fourth-quarter pro-forma loss of 24 cents, worse than a previous estimate of 19 cents.
Barclays Capital chimed in too. The investment bank sees 2009 processor units up only 2 percent, down from a previous estimate of 5 percent.
Other Wall Street firms such as Piper Jaffray and ThinkEquity are citing weakness. ThinkEquity has a sell rating on Intel due to significant weakness in corporate notebook demand and a steep reduction in notebook orders from Dell and Acer.
Avian Securities spoke to why demand is off. "PC OEMs...are worried about having too much inventories if end-market demand comes in materially weaker than expectations this holiday season."
More dire forecasts for the chip industry.
On the heels of comments from a chip industry watchdog group last week saying the chip equipment business is "on hold," Taiwan Semiconductor Manufacturing Company (TSMC), the world's largest contract chip manufacturer, said PC-related chip shipments are expected to be off 20 percent in the fourth quarter.
This bodes ill for PC makers, which appear to be cutting way back on chip orders.
"(For) our fourth quarter computer-related wafer shipments...we expect to see over a 20 percent decline. Which is very severe...compared to a seasonal mid-teens percentage growth," said CEO Rick Tsai on Thursday, speaking during the company's earnings announcement.
TSMC is considered an industry bellwether because it makes graphics chips for both Advanced Micro Devices and Nvidia and manufactures a variety of chips that go into cell phones and consumer electronics devices as well as other chips for PCs.
The "supply chain"--the myriad of companies that order chips from TSMC--is "reducing inventory very aggressively," he said.
Because of the state of the world's financial markets, "most our customers are aggressively paring their inventories and have thus reduced significantly their wafer demand," said Lora Ho, VP and chief financial officer of TSMC.
"We believe the foundry sector will likely underperform the overall semiconductor industry in 2009," he said. Foundry refers to a contract chip manufacturer. "In 2009, we now expect the semiconductor industry to decline by mid-to high single digit in 2009. With very little visibility."
TSMC reported a net profit of NT$30.574 billion ($930 million) in the July-September quarter, the company said Thursday. That was slightly higher than NT$30.4 billion reported a year ago.
Chartered Semiconductor, another large contract chip manufacturer, also said on Thursday that it "started to see orders declining from the middle of August, followed by some customer requests to reschedule deliveries forward. The weakness is expected to deepen into the fourth quarter."
The prepared comments continued: "Based on current outlook, we are guiding for Chartered revenues to be down approximately 21 percent sequentially...in the fourth quarter. In line with the demand outlook, we are also reducing our capital expenditure for 2008 to $650 million, which is $100 million lower than the amount we had earlier anticipated."
Being fabless isn't so hip these days.
Rambus and MIPS Technologies are both chip companies that don't have their own chip fabrication facilities. Intel does. Perhaps not coincidentally, Rambus and MIPS are restructuring, while Intel's business is coasting on top of surging processor shipments.
Both Rambus and MIPS, which make a living off licensing intellectual property for chips, announced layoffs this week. Intel, meanwhile, is selling lots of its tiny Atom processors and seeing processor shipments surge overall.
Rambus said Thursday that it will reduce its workforce by approximately 90 positions and will take a restructuring charge of approximately $4 million in the next two quarters. Earlier in the week, MIPS announced a restructuring charge it estimates at between $4 million and $5.5 million, and layoffs of its own: 15 percent of its 512 employees. "We believe the market continues to show signs of softness," MIPS said in a statement.
Don't tell that to Intel. IDC released a report this week showing that Intel processor shipments were up 20.8 percent in the second quarter over the same period last year. Intel market share also crept up by 0.9 percent in the second quarter, bringing it to 79.7 percent, according to IDC.
And sales of Intel's Atom processors are exceeding expectations, according to Reuters. The report quotes Chief Financial Officer Stacy Smith, who said that "Atom is off to a very, very rapid start, far exceeding our expectations when we started the year."
The Atom processor is used in high-profile products such as the Asus Eee PC and Acer Aspire.
Barring major strategic blunders, Intel appears to be on course to make gains in other markets. The company will preview its next-generation "Nehalem" Core i7 chip architecture at the Intel Developer Forum next week. Core i7 processors are due to ship in the fourth quarter.
And Intel is ramping up production of its latest generation of 45-nanometer mobile processors now. New ultra-low-power chips (rumored to appear in the next-generation MacBook Air, among other ultraslim notebooks) are due in September. Also, the chipmaker's first quad-core mobile processor debuted this week in laptops from Lenovo and Hewlett-Packard.
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