Semiconductor market could still strengthen

Semiconductor market could still strengthen

It's no secret that weak Asian economies have undermined the semiconductor market. But an industry research firm predicts that key segments of the market could strengthen by mid-1999.

In a study released recently, Dataquest predicts that the worldwide semiconductor market will decline 6 per cent this year but will grow by 11.8 per cent next year to $US155 billion if the shaky dynamic RAM market improves. If the DRAM market doesn't get better, the semiconductor market will grow by 9.7 per cent, Dataquest predicts.

Kenneth Pearlman, an analyst at CIBC Oppenheimer in New York, says DRAM is the obvious swing factor because it forces vendors to drive down their prices to cost, so revenue drops. But vendors are trying to get supply more in sync with demand by taking some production offline, he says.

Key players in the market include high-speed chip makers Advanced Micro Devices, which early last month released the K6-II chip; and Intel, which recently released its 333MHz Celeron and 450MHz Pentium II chips.

Tim Mahon, a senior semiconductor analyst at San Francisco-based brokerage Volpe Brown Whelan & Co., says his firm rates AMD as a hold and Intel as a buy. The brokerage raised its estimates for AMD because it had indications that the company will ship more processors this quarter than originally predicted.

"The sub-$US1000 desktop PC market has helped AMD, and they've done a good job teaming with Compaq and IBM," Mahon says. But with Intel's Celeron targeted toward the same sub-$1000 market, it will be tougher for AMD to compete, he says. Intel is rated higher, Mahon says, mostly because of its breadth of products, such as its new Xeon Pentium II-oriented server.

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