SAN JOSE, Calif.--Factors beyond end-user demand, unit growth, and capacity utilization are playing a greater role in the current IC cycle.
Against the backdrop of generally strong first-quarter earnings, some bearish analysts believe the current cycle is nearly over, with an IC slowdown expected as early as the second half of this year. In addition, the Philadelphia Semiconductor Index (SOX) has gone through a "bear market" correction. At one point, the SOX was about 20 percent off its peak, according to American Technology Research Inc., a research house based in Greenwich, Conn.
"What the sell-side has generally 'missed' is that solid fundamentals are caught in the cross-winds of macro issues," said Erach Desai, an analyst for American Technology Research.
In a report issued on Tuesday (May 25), Desai cited that high-technology as a whole has been impacted by what he called the "Four I's": interest rate worries, Iraq, incumbency, and inflation.
"Nothing that the semiconductor companies can deliver, or the company executives can say, or the cheerleading analysts can regurgitate will solve the worries caused by the Four I's," he said in the report. "Unless semiconductors can somehow bring about world peace, that is."
The analyst remains bullish in the near term despite the current and problematic macroeconomic issues. "We continue to believe that fundamentals are in place for a sustained semiconductor growth cycle and that the factors for [about] 28 percent top-line growth for overall semiconductors remain intact," he said.
"We remain of the opinion that the semiconductor component cycle may peak in the 2Q05 to 3Q05 time-frame, but only if a slew of planned capacity additions came on-line in 'China, Inc.' and with solid production yields," he added.
In March, Desai claimed the downturn would occur at 3:00 p.m. on Tuesday, February 29, 2005. At the time, the analyst admitted that he was joking about his predication. It is impossible to consider the downturn would fall on that date, given that there is no February 29th in 2005.
On a serious note, Desai sees strong chip growth in 2004 and part of 2005, followed by a moderate overcapacity situation in the second half of 2005. But the worries about the next downturn are greatly exaggerated and "overblown," according to the chip analyst (see March 18 story).