SAN JOSE, Calif. – Demand for semiconductors continued to weaken in the second quarter with some PC assemblers in Asia suggesting a decline in purchases of some parts of as much as 15-20% from the second quarter of 2014, according to a report from Wall Street analysts at Deutsche Bank.
“The iPhone supply chain and the automotive market continue to remain the only bright spots,” said analysts who visited nearly 30 companies in Taiwan, Korea and Japan in five days.
Chip demand also is weak for tablets, TVs and many Android phones, according to the report that gave the chip sector a neutral ranking overall.
“Only Huawei and Xiaomi remain bright spots among the Chinese [smartphone] players,” the report said. “Samsung continues to struggle at the low-to-mid end, while the Galaxy S6 and S6 Edge combined look on course to reach a respectable 45 million units this year,” it added.
As a result of the trip, Deutsche Bank now estimates PC sales will fall 9 percent in 2015 compared to 2014. That’s steeper than the 6% annual drop currently predicted by market watchers at International Data Corp.
As a result, the bank also trimmed its estimates of Intel’s performance, although it still retains a buy rating on the company as one of its favored semiconductor stocks. It now estimates Intel’s earnings per share will drop four percent in the second quarter with gross margins at 61 percent for the year.
To compensate for revenue declines, analyst Ross Seymore said he expects Intel will cut its 2015 spending to $19.4 billion, $200 million less than he previously estimated. A recent leaked memo suggested Intel will shave $300 million in spending due to the decline in PC sales this year with some of the savings coming from layoffs.
Seymore also is taking a more bearish stand on the roll out of Windows 10 and Intel’s next-generation processor, code-named Skylake. Although Win 10 is expected to ship July 29 and Skylake by about October, Seymore believes Intel will not see a significant sales impact from the products until the fourth quarter.
Separately the market for the capital equipment used to make chips also appears poised for a slowdown in the second half of the year and into 2016.
“3D NAND is a positive catalyst for etch and deposition players notably in 2016, but less so for lithography,” the report said. “We also heard consistent messaging that EUV continues to be delayed,” it added.
— Rick Merritt, Silicon Valley Bureau Chief, EE Times