Texas Instruments Unsurprise
We were recently asked (see the comments to this post) which chipmakers were likely to bear the brunt of the inventory glut we have been writing about. Our answer: Texas Instruments (TXN - Annual Report). So last night’s earnings warning shouldn’t really be called a surprise.
Chief Executive Richard Templeton said the third quarter was one of the best in the company’s history, but he also warned about a 12 percent decline in orders — a drop of $478 million, to $3.43 billion.
Templeton said TI believes that customers — manufacturers that use TI chips in their electronics products — built up their inventories and are running leaner without needing to place new orders. He also said orders were hurt by a shift in the wireless market toward low-priced cell phones.
Again, no surprise. Heck, we were writing about it back in June. The article continues:
The company believes the order decline is “near term,” Slaymaker said. “We don’t hear our customers talk about any broad turndown in consumption; it’s just the mix in wireless,” he said.
But the slowdown comes in the traditionally strong fourth quarter, and the first quarter is usually weaker.
Yep, and by the time orders pick up there will be a whole slew of new capacity available, which will cause prices to be slashed. And that is still assuming there isn’t a “broad turndown in consumption” despite evidence that the US consumer may be running out of gas.
Like this article? Why not try out:
[…] As you may guess, we are not surprised. But what’s done is done, and while 2006 is essentially in the bag what about the forecasts for 2007 and 2008? The chart below shows the year/year growth rate in semiconductor sales for each month going back to 1998. Data is courtesy of the Semiconductor Industry Association (SIA). […]