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Philips sees chip stability
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August 24, 2001: 2:37 p.m. ET
CEO of Dutch electronics maker says chip market has bottomed
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NEW YORK (CNNfn) - Philips Electronics believes its markets are trending toward stabilization, if not an upswing, CEO Gerard Kleisterlee told a news briefing Friday.
"The decline of the semiconductor market has bottomed out," Kleisterlee said, speaking at the IFA consumer electronics fair in Berlin.
Kleisterlee said this is particularly true for the semiconductor market, in which book-to-bill ratios – the proportion of orders to revenue – finally are stabilizing.
"We see now for several weeks already a consensus around a decline of semiconductor market year-on-year of 26 percent," Kleisterlee said.
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The decline of the semiconductor market has bottomed out.
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Gerard Kleisterlee
Chief executive
Philips Electronics |
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Netherlands-based Philips (PHG: up $1.07 to $27.77, Research, Estimates), Europe's largest consumer electronics group, is Europe's number three chipmaker, specializing in semiconductors for the telecommunications and household appliances markets and with no exposure to the personal computer (PC) market. Its semiconductor sales fell 23 percent in the second quarter from a year earlier.
"Semiconductors are fed by PCs and telecom. In PCs we have seen a wave. Somewhere around June people were optimistic PCs would rebound. And we saw in June orders picking up. In July, they fell back because PCs are not picking up. They are staying flat," Kleisterlee continued.
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While volatility in the semiconductor industry is nothing new, the current downturn began in the fall of 2000, and has created concern among analysts as to when the sector will begin to turn around.
"We've seen the same movement (as Philips)," said Hans Mosesmann, semiconductor analyst at Prudential Securities. "We think this quarter is the bottom."
"The order rate for your average semiconductor company is higher this quarter than the last," Mosesmann said, "suggesting that the calendar fourth quarter will be the first to see some sort of flattening out or even an uptick in revenue growth."
Data released in the last week support this idea.
Tuesday, a semiconductor trade group reported that orders for the equipment used to make chips were stronger than expected in July, the third month in a row data showed an improvement.
Semiconductor Equipment and Materials International, or SEMI, said orders for chip-equipment last month rose 5 percent to $764.2 million. What's more, SEMI reported that chip-equipment makers took $67 in new orders for every $100 in deliveries, the industry's highest book-to-bill ratio since February.
Chip-equipment analysts consider the book-to-bill ratio as indicative of future demand. While the most recent figures still show a disparity between bookings and billings, they were stronger than some had expected.
"Negative growth, not only on a sequential basis but on a year-over-year basis, will be less severe," Mosesman said, "so it looks like we're seeing somewhat of a recovery."
The Philadelphia Stock Exchange's semiconductor index (Soxx) was up more than 5 percent in early afternoon trade. 
--from staff and wire reports
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