After a flat 2007, the analog semiconductor market is positioned for a rebound this year. But not all analog vendors are expected to reap the benefits.
Vendors are variously wrestling with lackluster demand and capacity shortages. There are worries about an inventory glut of analog devices among South Korea's handset makers.
American Technology Research Inc. recently cut its quarterly estimates for Linear Technology Corp., Maxim Integrated Products Inc. and Micrel Semiconductor Inc. ATR did not change its estimates for Intersil Corp. and Texas Instruments, but it did note that a capacity shortage is bedeviling Intersil.
"Select companies have the potential to exceed overall analog growth through exposure to PC and consumer end markets," said ATR analyst Doug Freedman. "These markets include ultramobile notebook PCs and handsets with high-end features requiring analog content," such as touchscreens, multimedia capabilities, sensors and support for emerging wireless protocols.
But the times are changing for analog. "We believe the first quarter will see only incremental growth vs. the historically robust seasonal growth patterns for analog, reflecting caution and uncertainty regarding customer de- mand and inventories," Freedman said. "Forecasts for the overall analog business will likely be subdued and cautious, as customers process the mixed holiday shopping season and as macroeconomic headwinds continue."
Susie Inouye, research director, president and chief executive of Databeans Inc., has a slightly different view. There are no signs of booming demand or allocations for analog chips, Inouye said, but "we also haven't seen anything about an inventory build in Q1."
While Databeans believes the analog sector had a flat 2007, Inouye expects 12 percent analog growth this year. In 2006, the segment logged 16 percent growth, she said. Stronger analog markets include those for data converters and power management de- vices, while comparator sales are relatively slow.
Market watcher iSuppli Corp. is projecting 7.4 percent growth for analog in 2008, up from the 4.7 percent rise that iSuppli believes the sector tallied last year. Standard linear devices will be up 11 percent, the research firm believes, while analog ASICs and application-specific standard products will climb a more modest 5.4 percent.
Texas Instruments, the industry's largest analog chip maker, is bullish on the segment's prospects this year. "We see growth across the board," said Art George, senior vice president of TI's high-performance analog business unit.
ATR's Freedman said TI has momentum going into 2008. "We expect solid semi profitability in Q4, as [TI's] mix continues to move toward higher-margin, high-performance analog and catalog DSP," he said.
The same can't be said for Intersil. "We believe Intersil's capacity constraints improved during Q4 but still left customers short of supply," Freedman said. "We expect the first quarter to be used to restock to more normal, but [still] reduced, seasonal levels."
On the other hand, he said, there were "some early indications" entering the first quarter of an uptick in industrial end markets, "which could provide potential upside" for Intersil. "Q1 could surprise investors as new products that targeted the industrial power management market start to gain traction and contribute material revenue."
The analyst cited demand problems as the reason for his revised forecasts for Linear Technology and Maxim. "Linear is entering a cautious and uncertain period regarding customer demand as current distributor inventories are digested," he said. "Checks indicate that lead times for customers are growing shorter, implying less end-market inventory buildup and reduced revenue growth."
As for Maxim, "We believe that Q1 will not be boosted by seasonal growth rates in the industrial segment, as Maxim has seen its distribution-based sales percentage decline to 35 percent," Freedman said.
The analyst also cut his forecast for Micrel, saying, "The revision forecasts a slight revenue decline in Q1, as expectations are for end markets to continue to reduce inventory levels."
Freeman added that "China-based wireline communications and Korean wireless handsets drove weakness on inventory concerns" but that "other end markets and regions are performing in line with expectations."