SAN FRANCISCOThe market for communications ICswhich had been a relative pocket of strength through the third quarter for a downturn-stricken semiconductor industryis experiencing rapid degradation, forcing suppliers to cut production, according to an analyst.
In a research note published Tuesday (Dec. 2), Craig Berger, an analyst with FBR Capital Markets said chipmakers such as Broadcom Corp., Qualcomm Inc., Marvell Technology Group Ltd. and Texas Instruments Inc. will not be able to avoid the downturn which has engulfed the broader semiconductor industry.
"Communication IC vendors like Broadcom have been relative outperformers of late," with most posting strong results in the second and third quarters of 2008, Berger wrote.
"However, our recent checks show that this end market is weakening now as it catches up to the weakness already seen in other sectors, particularly as the economic malaise spreads to corporations and enterprises," Berger wrote.
Broadcom and Qualcomm have been among the highest performing chip companies year-to-date. Both have leapfrogged several peers in moving up in the various lists ranking chipmakers for the year, such as the one offered by iSuppli Corp. on Monday. Qualcomm leapt into the top 10 in both the iSuppli list and one published last month by IC Insights Inc.
Citing new production checks from three of the top four chip foundries, Berger said Broadcom's fourth quarter production may decline 13 percent from third quarter and is trending down another 17 percent in the first quarter of 2009. Marvell's fourth quarter production may decline 18 percent sequentially and is trending down another 10 percent in the first quarter of 2009, he wrote.
TI's fourth quarter production may decline 18 percent from third quarter and is trending down an additional 20 percent in the first quarter of 2009, according to Berger. Qualcomm's fourth quarter production may be down a whopping 30 percent from third quarter, Berger said.
Berger also cited production checks as the source for theorizing that Advanced Micro Devices and Nvidia Corp. would suffer quarter-over-quarter production declines of 17 percent and 25 percent, respectively. Both AMD and Nvidia are on track for further production decreases in the first quarter of 2009, according to Berger.
Programmable logic supplier Xilinx Inc. "may be a relative outperformer, with smaller production declines planned versus peers," Berger wrote. He forecast that Xilinx' fourth quarter production would decline by 10 percent from the third quarter, and said the first quarter of 2009 is trending down an additional 12 percent.
Berger said FBR expects discretionary IT spending to decline by 5 to 10 percent next year.