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Chip sales rise, stocks fall
September 5, 2000: 4:43 p.m. ET

Industry scores another sales record, but analyst's downgrade hurt stocks
By Staff Writer Richard Richtmyer
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NEW YORK (CNNfn) - A chip industry trade group said Tuesday that worldwide semiconductor sales in July soared to record levels, but the report's impact on Wall Street was muted by an analyst's bearish forecast for industry leader Intel.

Based on a three-month rolling average, the Semiconductor Industry Association said global chip sales in July were $17.3 billion, up 50 percent from $11.5 billion in the same period a year earlier.

Continued demand in Internet infrastructure and wireless communications fueled the growth, which the SIA said was strong in all geographic regions. At 57.3 percent, sales growth was strongest in the Asia Pacific region; followed by Japan, which rose 52 percent; Europe, where sales rose 46.5 percent; and the Americas, which posted a year-over-year sales increase of 46.1 percent.

The SIA's report, however, was overshadowed on Wall Street by negative comments from an analyst regarding Intel, the world's largest supplier of PC microprocessors. graphic Ashok Kumar of Piper Jaffray downgraded his rating on Intel to "buy" from "strong buy," citing looming weakness in demand for PC processors. The report cast a pall across the entire chip sector, pulling the Philadelphia Stock Exchange's semiconductor index 1.8 percent lower to 1,121.75.

Doug Andrey, the SIA's director of finance, said the industry's growth is being driven primarily by communications-related products such as digital signal processors, or DSPs, which are used in a wide range of electronics, including digital cellular phones and high-speed Internet access devices.

"Communications chips have been the strongest part of this recovery," Andrey said in an interview Tuesday. "If you just look at revenue growth last year, we had DSP up 25 percent but processors were only up 9 percent."

While PCs remain the largest single market for semiconductors, the SIA expects communications chips -- including DSPs, flash memory and chips used in fiber-optic networking -- to represent an increasing portion of total end-market demand moving ahead.

In its most recent growth forecast, the SIA said it expects worldwide semiconductor sales to rise 31 percent in all of 2000, with revenue of $195 billion. However, the forecast calls for PC microprocessor growth of only 16 percent during that time. Meanwhile, DSPs are expected to post a 55 percent growth rate, while flash memory sales are expected to rise 116 percent.

"Our view is that the industry remains very strong," Andrey said.

Tim Mahon, a chip industry analyst at Credit Suisse First Boston agreed. He said the latest sales report, while a trailing indicator, "is another affirmation of the industry's current cyclical upturn and a positive data point reflecting a strong start to the industry's September quarter."

Among chip stocks Tuesday: Intel (INTC: Research, Estimates) shares finished $4.69 lower at $69.25; Intel's PC microprocessor rival Advanced Micro Devices (AMD: Research, Estimates) slipped $3 to $34.50; Texas Instruments (TXN: Research, Estimates), the largest supplier of DSPs and analog chips, fell 94 cents to $66.06; ST Microelectronics (STM: Research, Estimates), a leading supplier of flash memory, slipped $1.69 to $61.12; and Analog Devices (ADI: Research, Estimates), which focuses on the communications market, ended the session $5.12 lower at $96.25. Back to top


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