Business | Technology
Chipmakers feel heat as demand hits a wall
Since October, semiconductor analysts and industry executives have started using a phrase to describe market conditions that would have been all but unthinkable for most of the past eight years.
- By Robin Kwong, Financial Times
- Published: 23:46 December 5, 2008
Since October, semiconductor analysts and industry executives have started using a phrase to describe market conditions that would have been all but unthinkable for most of the past eight years.
"This could be worse than when the dotcom bubble burst," they say.
The rapid loss of consumer confidence in the past few weeks is starting to take its toll on the global technology industry, and nowhere is this more evident now than among chip manufacturers.
Semiconductors, the building blocks of the digital age, sit at the start of the production chain for products ranging from mobile phones to computers to increasingly "smart" household appliances.
The past month has seen a barrage of bad news globally as chipmakers and their customers rushed to update investors on an ever-worsening situation.
This was underscored when Taiwan Semiconductor Manufacturing, the biggest contract chipmaker, this week issued its first cut in sales and profit forecasts in seven years.
TSMC, which commands more than half the global market for contract chip-making, said revenues in the last three months of this year could be up to 11 per cent less than the company had been forecasting at the end of October.
Bad news
TSMC is widely regarded as one of the best-run semiconductor manufacturers in the world, and for it to issue such a revision "really underpins how bad the state of the industry is," says Warren Lau, an analyst at Macquarie.
While the woes in the semiconductor industry after the tech bubble collapsed were mainly due to over-expansion by producers, this time the trouble stems from a sudden fall in demand from the end-users of digital products.
Some 60 per cent of technology demand comes from consumers, says Cheng Ming Kai, analyst at CLSA Asia Pacific Markets, and "it is no secret that consumers are spending less".
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