Mr. Wang: I am the semiconductor analyst here at Wedbush Morgan. I cover primarily two areas: the PC chip/graphics companies - i.e., Intel (INTC) and NVIDIA (NVDA) - as well as analog and power management companies - i.e., TI (TXN), ON Semi (ONNN) and Intersil (ISIL).
TWST: Would you give us a sense of what's been occurring in these segments this
year?
Mr. Wang: Looking at the big picture, we entered the year in a very bad state
with significant negative revisions from most companies. We were in the middle
of a recessionary environment. Whenever the economy starts falling apart,
companies stop building things because people aren't buying them. When you stop
building things, the first guy that's going to be hit are semiconductor
companies, as they make the chips that go into the devices that the big
manufacturers produce.
On the semi side at the onset of the year, we were in the middle of a huge
monsoon. That said, we have seen some stabilization over the last six months.
I'd point out that during this past cycle, we've seen the market recover a lot
quicker than in the last two or three cycles. This is because many companies
have had the same management teams in place for many years now. They have seen
this type of environment before - semis are very cyclical - and they have
learned from their previous mistakes. So they were very quick to cut back
manufacturing and other expenses to reconcile their cost structure. The faster
that we get past this rough spot, the faster we get back to a healthy situation.
So I think right now, as we speak, we are seeing a lot of companies emerge in a
stabilized type of environment in a healthier financial situation. This brings
us to where we are today.
If we look forward to the next few quarters, I'd say that we're in a relatively
stable environment. Semi companies care a lot about inventories, and inventories
are very much under control, highly scrutinized and at very healthy levels. As
we look into the back half of the year, the key question is going to be whether
or not end demand will materialize. That is, if the consumer actually shows up
at the stores and buys things. Right now, we are quickly approaching the back-
to-school season. This is the most critical thing right now.
We have seen semi stocks recover because we are currently seeing stabilization.
That said, we are not going to see semis move materially higher until we start
getting data points for initial back-to-school trends. We definitely need to see
back-to-school occur this year. Last year it was a little weaker than we would
have liked, but it was still there. This year we've seen unemployment numbers go
higher and the macro economy is still in a bit of a mess, although it is
stabilizing. So the question really is, "Are consumers going to buy computers,
electronics and things for back-to-school?" We will start to get the initial
data points in the August/September time frame. The next round of data points
will then be the ones leading up to the holiday season.
Tickers included in this excerpt: ADI, INTC, ISIL, MPWR, MSFT, NSM, NVDA, ONCC, TXN
For more information call (212) 952 7433. The Wall Street Transcript does not endorse any of the comments made by interviewees, and does not make stock recommendations.