The Recovery Of the Semiconductor Industry Not This Year

Demand for PCs is projected to revive from the second half of next year. But the revival comes one year later than expected. As a result, semiconductor prices are likely to recover at slow speed.

Jeong Chang-won, a semiconductor analyst at Daewoo Securities Co., Ltd, said on June 10, "People engaged in the semiconductor industry in Taiwan, whom I met at CompuTechs, an expo for computer components, which was held in Taiwan last week, were skeptical about the outlook for the PC and semiconductor markets in the second half of this year."

Their gloomy outlook is based primarily on the demand for motherboards, a major component in assembling a PC. Even though the demand has grown a little in the third quarter from July to September thanks to seasonal factors, but it is predicted to fall short of expectation. Taiwan supplies a whopping 90% of motherboards in the world. The demand for motherboards is used to forecast the future demand for PCs. Mr. Jeong went on to say, "Unlike in the past, CompuTechs showed fewer new computer models which can grap consumers` attention, failing to facilitate PC demand."

The same goes for the demand for semiconductors.

Since Intel Corporation, which is competing against Taiwanese companies, is frequently releasing new chip sets, it is difficult for semiconductor buyers to build up their stocks even in peak seasons such as the third quarter. It is because a new chip set requires a different type of DRAM chips. Mr. Jeong predicted, "Unlike last year, which showed dismal performance, this year`s second half was expected to see a double-digit growth of PC demand but it will come true in the second half of next year."

Joe Osha, a semiconductor analyst at Merillynch Securities in the U.S., downgraded investment rating of Intel ahead of the announcement of Intel`s performance in the second quarter from April to June, saying, "The semiconductor industry is not likely recover soon."

The semiconductor industry forecasts that Intel will record $6.2 billion to $6.4 billion, falling short of $6.4 billion to $7 billion in the second quarter. Its performance in the first quarter from January to March stood at $6.94 billion.

Na-Yeon Lee larosa@donga.com