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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: Can you give us a feel of where we are in the semiconductor industry cycle at this point?

Mr. Scovel: We’re in the middle of a pretty bad downturn. Arguably, it’s the worst downturn in the history of the industry and we’re looking for the bottom.

TWST: You don’t believe we’re at the bottom yet.

Mr. Scovel: No, we’re not there, but I do believe it’s coming — probably a couple of months away. Things were very, very bad in the first quarter of this year. We now know from semiconductor industry statistics that the worldwide business contracted almost 20% last quarter, providing a number for the environment described as a free-fall. This downturn is very, very severe. There are some indications at this point that the decline is slowing, but things are still very weak. We’re hoping that business conditions ease into a bottom or plateau of sorts during the summer months.

TWST: What do we use as benchmarks to tell us when we’ve hit bottom?

Mr. Scovel: In this environment we need to see order cancellations and push-outs stop, and customer ordering activity pick up. At this point, we’d even be satisfied with customer forecasts with any degree of confidence. When industry players complain about poor visibility, it means that customers are not cutting purchase orders or providing forecasts with any level of confidence. Poor visibility simply means no orders.

TWST: So people are still sitting on their hands.

Mr. Scovel: Exactly.

TWST: What does that mean in terms of the current competitive environment?

Mr. Scovel: It’s interesting, but so far competition hasn’t been much of a problem, at least in some sectors. Order cancellations and push-outs have really dominated the business environment for the last four or five months, which really doesn’t allow customers to renegotiate prices or enjoy competitive bidding. As we move forward, the cancellations and push-outs ease and new orders emerge, then competition heats up and we start to see price erosion as suppliers knock heads to grab what business is available. So far we’ve seen price erosion in memories and microprocessors, especially in DRAMs and flash memory. But a lot of other products have not experienced significant price erosion — at least not yet.

TWST: Let’s flip the coin over. Who would you stay away from and where is the real potential bomb?

Mr. Scovel: We remain neutral on Intel (Nasdaq:INTC) at this point. It’s a great company that has done very, very well over the years. However, we think in many ways it’s a victim of its own success. We think it’s going to be very difficult for this company to grow with the maturing of the PC market. While we agree with the company’s concentrated diversification into faster growing communications markets, Intel is so big that it has to virtually dominate most markets overnight to make a difference to overall corporate growth. It’s just so big and has been so successful that we believe it’s going to be very, very difficult for the company to deliver on growth that many investors have come to take for granted.

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.