For Subscribers

Get the complete article now!

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: What’s going to lead us out? What segments of the demand side are going to show improvement over the next year or two?

Mr. Osha: Well, I think, for starters, you’re going to see devices, by which I mean portable devices, becoming more and more important. We’ve seen some early examples of that with the RIM pager and Palm Pilots and whatnot. But I think they are going to become even more important as we go forward. I think that PCs will lead out to some extent, although I think the pricing regime is going to be much tougher. I have real doubts about wireless this year. We’re going to get some upticks, simply as the order activity returns to a level that reflects the number of handsets that are getting built. But I’m pretty concerned about the rollout of next generation wireless services this year. And then on the infrastructure side, again, there’s no way that that business is going to lead us out.

TWST: And Joe, what do you see as the shining stars over the next year or so?

Mr. Osha: I think it’s interesting. We just heard about a number of new, smaller companies. I’m not sure I agree that the tried and true companies are necessarily the ones that you’re always going to want to buy. That’s true in some cases where the business models are largely unchanged. But if you look at a lot of the companies that were dominant in this business 10 years ago, a number of them are not around, or are much diminished. So I think in selecting a group of companies to focus on, as Eric just did, they must be positioned in the right markets. I think communications makes sense. I think portable devices makes sense, and I think cheap PCs make sense. So how do you play that? Well, analog semiconductor companies are, in general, pretty stable business models, and they’re also, in a lot of cases, run by very experienced managements, which is valuable right now.

TWST: As you mentioned, in the last cycles there have always been some people who didn’t make it. Who’s on the edge here? Who may not be around longer term?

Mr. Osha: Well, I think “not be around” is a strong term. The semiconductor business is inherently pretty profitable, once you manage to get an enterprise going. So companies get bought, but you see very few companies actually go under. In terms of companies whose importance in the business, I think, is going to be much diminished, it’s mostly the captive semiconductor operations or the recently spun out semiconductor operations of bigger companies. I guess the last point would be that Intel (Nasdaq:INTC) is a really interesting case study here because they’re huge, literally 3 times the size of the next competitor, and with the ability to spend an incredible amount of money. But I have doubts about their ability to grow at the rate at which they have been growing. Of course it’s silly to say that Intel won’t be around. They’ll always be around, and they’ll always be very powerful.

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.