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Five analysts and top management from eight sector firms examine the Semiconductor sector in this special 57-page issue from The Wall Street Transcript, available at (212/952-7433) or http://www.twst.com/info/info377.htm

TWST: Eric, what do you see in the competitive environment?

Dr. Chen: We believe the competitive environment is heating up because, in an environment where demand does not support a lot of growth for many different companies, you will see companies fighting over the same piece of business. That is one part of it. Also, over the last several years, part of the semiconductor universe has gone through a very important maturation phase. Specifically, I am referring to the segments within the semiconductor industry that cater to the communications supply chain. They have gone through a maturation phase and their diverse strategies have converged, so competition is bound to heat up in that scenario.

TWST: What’s the inventory situation in the industry at this point?

Dr. Chen: On the inventory situation, you really have to look at different vertical markets to try to time how long that inventory is going to take to burn off. I think the inventory in the PC channel is relatively light, and that is pretty well known. In fact, we have gone through several cycles of restocking and burning inventory again. The PC segment is one of the supply chains that is extremely well engineered. The next market to burn inventory is probably going to be components used in the wireless communications world. The inventory correction in that particular vertical has also gone through a couple rounds of building up and then burning off. We think the June-July time frame is probably going to be the low point, driven by the fact that it is going to be the peak of the inventory burn for a number of the sectors. Inventory is probably the worst in the wireline communications sector. Even within wireline communications there are different segments. The ones that are driven by consumer spending (things like DSL modems, cable modems) should burn inventory relatively quickly. We are looking at the end of June or maybe some time in Q3. Then there are the IT spending-driven network components, and those are probably going to come out relatively quickly as well because we believe some IT spending will come back, driven by the corporations’ need to improve their communications. On the other hand, we believe the segments related to telecom or to the carrier side of the communications business are going to be stuck in the inventory tunnel for a long time. One of the most important things to remember is that it takes demand to move inventory. We have built a lot of inventory across the board. When demand is sufficient, then inventory will be burned off. If there is no demand or demand remains relatively anemic, then inventory will continue to be an overhang.

TWST: What are some of the names that you’re looking favorably upon today?

Dr. Chen: I really do like Marvell Technology (Nasdaq:MRVL), which is a communications semiconductor supplier, a very interesting player in the Gigabit Ethernet space. We also like Microtune (Nasdaq:TUNE), which is also a communications silicon supplier into the cable data service arena.

TWST: Do they offer something that others don’t that will give them that opportunity?

Dr. Chen: Yes, I do think that the technology position that those two companies have in their respective markets is very, very strong. They will also benefit from the fact that their markets are either driven by the consumer spending for broadband access or the new areas of enterprise networking.

This special issue includes:

1) Semiconductor - In an in-depth (5,500 words) Analyst Roundtable, Eric Chen, Senior Analyst at JPMorgan H and Q and Joseph A. Osha, top ranked Analyst responsible for covering the semiconductor industry at Merrill Lynch Global Securities, examine the outlook for the sector including, inventory levels, future outlook for smaller companies and share specific stock recommendations.

2) The TWST confidential Off-The-Record survey of management performance at twenty-three sector firms asked market insiders about the ability of management teams to create shareholder value.

3) Outlook for Semiconductors - In an in-depth (3,000 words) Analyst Interview, Dan Scovel, Semiconductor Analyst with Needham and Company, examines the outlook for the sector and shares specific stock recommendations.

4) Semiconductor Industry Overview - In an in-depth (2,000 words) Analyst Interview, Arun Veerappan, Managing Director at Robertson Stephens, examines the outlook for the sector and shares specific stock recommendations.

5) Semiconductor Stocks - In an in-depth (1,900 words) Analyst Interview, Jonathan Joseph, Managing Director at Salomon Smith Barney, examines the outlook for the sector and shares specific stock recommendations.

6) CEO interviews (average 2,500 words). Top management of eight sector firms examine the outlook for their firm and the sector.