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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: You mentioned that ability to maintain profitability in this cycle, which is pretty impressive. That has not been the case in the past. What’s different?

Mr. Scovel: Honestly, I think the biggest difference is that the industry has matured. It’s about 30 years old now and a lot of senior managers have seen multiple business cycles and know how to handle them. During the last up cycle, a lot of companies were very careful in how they added capacity. They brought up capacity in a measured, modular fashion, say, 1,000 wafers per month, and let the market digest it before committing to more. I think the industry was much smarter and more careful about the way it managed the expansion. The other thing is the rise of the fabless business model and pure-play foundries, which exist to simply crank wafers out at the lowest possible cost. The traditional, integrated device manufacturer has to do a lot of things very well: design and market products, continually develop advanced manufacturing process technologies, and run the entire operation efficiently. A foundry can efficiently support multiple fabless chip companies that intensely focus on designing and marketing products really well. I think this increase in specialization helps the overall industry get better at what it does. It gets better at managing inventories, understanding markets, and maximizing value. I think the industry is growing up. It’s getting better at doing what it’s done all along.

TWST: As we look at the next year or two, who are the winners? Who do you like in the industry?

Mr. Scovel: 2001 is a bad year — pretty much a write-off for the chip industry. The question now is, what does the recovery look like? I think 2002 is likely to be pretty good. We’ll probably get some decent growth, if for no other reason than because the comparables will be so easy coming off of 2001. I think PC market growth will probably underperform relative to many other markets. But let’s not kid ourselves: it’s still a huge market and there’s a lot of opportunity within the space. At the same time, while there’s a lot of opportunity in the networking and telecom space, we shouldn’t get carried away with growth expectations. I think that industry is going to be much more careful in how it looks at costs, rather than just time-to-market and performance. I think that’s healthy as it encourages a smarter use of resources and ultimately strengthens the business. Cell phones have probably peaked. I think there’s still a lot of good business related to technology transitions, but frankly, it’s probably seen its heyday of growth in the last couple of years. I think consumer electronics is at the front end of many years of above average growth. One of the most exciting things is to focus on niche products where there is expected to be significant growth.

TWST: Are there some specific names that people should begin to think about?

Mr. Scovel: We’re bullish on Advanced Micro Devices (NYSE:AMD). Another company that we picked up coverage on recently is Oak Technology (Nasdaq:OAKT). Oak builds controller chips for CD-RW optical disk drives, which will soon migrate to combo drives and DVD drives. This is a very large market — at over 130 million units per year — and a very difficult business where time to market is critical. However, we think Oak is in a unique position to benefit from competitors that are exiting the market, as well as certain favorable changes in the customer base. This is a unique situation where we believe the company is likely to enjoy significant market share gains over the next few quarters.

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.