One, usage of semiconductor wafers is probably bottoming this quarter as part of chip makers’ attempts to clear excess inventory from the market, and should head up later in the year, says J.P. Morgan’s Jay Deahna. Says Deahna:
Overall Semi industry wafer fab utilization declined to 87.2% in the fourth calendar quarter of 2006, from 89.1% in the third […] We expect a further modest decline in wafer fab utilization rates in the first quarter and expect the overall industry utilization rate to bottom during the quarter in the mid-80s range.
Deahna last week said spending on chip-making equipment will pause this year and pick up again in ‘08.
Also, Intel (INTC) said it would spend upwards of $1.5 billion this year to upgrade a chip plant in Rio Rancho, New Mexico, to make chips with circuit widths that measure 45 billionths of a meter, which may remove some concern about further chip equipment spending falloff, which would be good news for equipment makers such as Applied Materials (AMAT).
In a note yesterday, A.G. Edwards analyst David Wong said the PC market’s seeing the first sign of a chip turn-around, citing both as hopeful signs the strong results from Hewlett-Packard’s (HPQ) FQ1 2007, reported last week, plus Analog Devices’s (ADI) strong results. The drop in wafer usage signal there will be pressure on prices of semis in March, though Microprocessors may hold up better than other sorts of chips. Micron Technologies (MU) already has probably seen price declines on DRAM memory, and Micron’s flash memory products probably will see 30% to 40% price declines from the previous quarter by the end of March.
Intel shares yesterday rose almost half a percent to $20.85.