In the near term, financial performance of semiconductor companies in the September quarter is likely to disappoint. The third calendar quarter is usually associated with pronounced seasonality, with 40 to 50 percent of the quarterly revenue booked in the month of September. Temporary shutdowns of production, selling and shipment for the week following the Sept. 11 attacks could cause a downside of roughly 10 to 15 percent on the revenue line and certainly more on profitability.

The temporary suspension of the global transportation system, especially air freight in and out of the United States, can cause major disruptions in the supply chain. Electronics and semiconductors are particularly vulnerable because these are truly global industries, heavily dependent on overseas manufacturing. The magnitude of the supply chain disruption is difficult to estimate, but one can argue that those areas with lean inventory and just-in-time production will likely be affected most. This would point to PCs and some consumer electronics products, such as cell phones.

In the intermediate term, the shock on consumer confidence does not bode well for semiconductor demand. According to our estimate, approximately 50 percent of all semiconductors are used in electronics products sold directly to consumers, so this layer of impact will be direct and immediate. The other half of semiconductor sales depends on capital spending of businesses, which ultimately is determined by the health of the economy. The only exception is defense-related spending, which accounts for merely 3 percent of all electronics production and 3 to 5 percent of chip sales-clearly not enough to carry the day.

We should be confident, though, that the terrorist attacks did not and could not break the backbone of the industry. Most importantly, the silicon economics, paced by Moore's Law, remains intact. Remember, the chip industry grows in two, and only two, avenues: It doubles the functionality at the same cost every 18 months; or it halves the per-function cost every year and half. Neither of these avenues has been jeopardized; therefore, the long-term outlook of the industry is still very robust.

Eric Chen leads Semiconductor Research at JPMorgan H&Q Equity Research.