Why has semiconductor production slowed in China? (NUHC 1Q06 conf call)

Nu Horizons Electronics (ticker: NUHC), a distributor of electronic components reported Q1 2006 results yesterday. Dave Bowers, President of Nu Horizons' Semiconductor Division responded to reports of a slowdown in semiconductor production in China during management's earnings results conference call:

Analyst:

....Since you initiated your presence in China over the past year or so, I'm hoping you can comment on the following point. It's been widely reported that in semiconductors inside China proper, China's companies have reduced their production this year by 43%, companies like MIC. Do you have any explanation why? Why would Chinese companies reduce their production this year, and does this have any effect on your volume?

Dave Bowers, President of Nu Horizons' Semiconductor Division:

....So generally speaking, the companies in China that are producing semiconductors at this point -- China is still a very small player on the world scale but we expect that to change rapidly. In general today, the semiconductors being produced in China, SMIZ are targeted at very high volume consumer-types of applications. Cell phones being a great example of that. And cell phones, as you probably know, have become an extremely cyclical business, and, in fact, China's demand has reported to have dropped off for cell phones very -- recently. In the marks that we play, in the communications markets, the industrial instrumentation, the high end visual entertainment markets we haven't seen a substantial change in Chinese semiconductor contact. But we expect to increase.

(Quotes are from the CCBN StreetEvents transcript.)

NUHC chart.

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