Chipmakers Slash 2007 Forecasts

Chipmakers have drastically cut their 2007 forecasts, according to data released Wednesday by World Semiconductor Trade Statistics [WSTS]. Following a weaker-than-expected first quarter, semiconductor manufacturers now forecast 2.6% growth in 2007, down from the 8.6% they foresaw in October. "Revenues in first quarter 2007 (were) lower than expected for almost all products," WSTS said in a statement. For 2008, it cut its growth forecast from 12.1% to 10.2%. Reuters says the revisions underscore a sense of oversupply within the industry, which ramped up production on expectations of a jump in demand from Microsoft Corp.'s Vista release. 2009 growth was pegged at 5.2%. Asia Pacific demand continues to be the fastest growing among regions. On May 24, Goldman Sachs analyst James Covello predicted what may be the "worst semiconductor equipment downturn" ever, and said he would short any semi company -- "Novellus is No. 1 (of the stocks he would short), followed by Applied Materials and Lam Research, in that order." In a preview of its Q2 semiconductor forecast due Wednesday, Gartner analyst Richard Gordon said it is likely to revise its market growth rate forecast for 2007 from 6.4% to below 5%. Gartner calls for weak DRAM sales, but said growing demand in the auto industry would be a bright spot.

Sources: Press release, Reuters, Investor's Business Daily, EDN
Commentary: Analysts Get Bearish On Semis a Year Late • No Longer a Contrarian View: The Semi Equipment Slowdown • Citi: DRAM Sector Is Bleeding To Death
Stocks/ETFs to watch: Intel Corp. (INTC), Advanced Micro Devices Inc. (AMD), Texas Instruments Inc. (TXN), Novellus Systems Inc. (NVLS), Applied Materials Inc. (AMAT), Lam Research Corp. (LRCX). ETFs: HOLDRS Semiconductors (SMH), SPDR Semiconductor (XSD), PowerShares Dynamic Semiconductor (PSI)

Seeking Alpha's news briefs are combined into a pre-market summary called Wall Street Breakfast. Get Wall Street Breakfast by email -- it's free and takes only seconds to sign up.