SAN FRANCISCO -- In a sign that the IC market is finally picking up, National Semiconductor Corp. said it is increasing its wafer-fab capacity to meet unexpected demand in chip orders, especially from LG Electronics, Samsung, and other systems houses in Asia.
National's overall fab utilization rate stood in the 40% range two quarters ago, but the company is now boosting its internal production to the upper 50% level to meet demand in the marketplace, said Don Macleod, chief operating officer at Santa Clara, Calif.-based chip maker.
"We're ramping up our wafer and test capacity," Macleod said. "We're running our fabs in the high 50% range," he said during a presentation at a technology conference here on Tuesday. The conference is sponsored by Merrill Lynch & Co. Inc.
The National executive was quick to point out that the current IC downturn is far from over, but he also noted that overall chip demand is picking up while the inventory glut is easing in the marketplace.
He added that there is an "inventory replenishment" cycle under way in the market right now, especially in the flat-panel display, wireless, and other sectors. "We think our inventories are too low," he said.
At the same time, there is a major shift taking place among National's customer base. Two years ago, National realized only 30% of its sales from Asia. "Now, 45% of our orders are coming out of Asia," he said.
In a brief interview with SBN after the presentation, Macleod surprised some observers by saying that South Korea's Samsung Electronics Co. Ltd. is National's largest customer worldwide. Another Korean giant, LG Electronics Inc., is National's second largest customer, Macleod said.
Samsung and LG, which are major players in the handset market, are using National's popular phase-lock loop (PLL) and other wireless products, he said. Samsung, in particular, is a major user of National's display and consumer ICs, he added.
National is also seeing growth among handset makers in Japan and Europe. The company's four-chip GSM solution is being used in a handset from the Ericsson-Sony team. And for the first time, National's analog chips are moving into Nokia's handset lines, he added.
In March, National reported revenues of $369.5 million for its third fiscal quarter ended Feb. 24, a 22.3% drop from $475.6 million in the like period a year ago, but a 1% increase from $366.5 million in the previous quarter.
The company also reported a loss of $37.8 million, or minus $0.21 a share, in the quarter, compared to a profit of $39.2 million, or $0.21 cents a share, in the like period a year ago. In the previous quarter, National reported a loss of $46.6 million, or $0.26 a share.
But in the fourth quarter, National projects its revenues will increase by 6-9% over the third quarter-somewhere in the range of approximately $390-to-$405 million. share (see March 7 story ).
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