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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: To what would you attribute the miscalculations about the amount of capacity that was going to be needed to meet the predicted demand for semiconductors?

Mr. Veerappan: In hindsight, it’s easy to say that there certainly was “irrational exuberance,” to use a popular phrase that Mr. Greenspan coined a few years ago, and we can look back and see that we were certainly building far in excess of projected demand in the hope and belief that the Internet phenomenon, if you will, would continue growing at triple-digit growth rates on a consistent basis. That simply hasn’t been the case, as we can tell from hindsight.

TWST: What happened to the valuations, overall, for this group?

Mr. Veerappan: Certainly they’ve compressed, to say the least. But having said that, they are still not anywhere close to the levels that they were in, let’s say, 1993, 1994, 1995, when many of these companies were still infants. Even if you compared them to traditional semiconductor companies, they are dramatically higher. The reasons for that are twofold. First, they are higher as people are willing to look past the current downturn and are believers in the secular growth potential for the communications market. Second, they are higher due to sheer optimism. You have to reach a midway point, and that hasn’t been arrived at as yet.

TWST: Are there any other companies that you’d like to highlight that could provide a real upside surprise for investors, maybe not in 2001, or even in 2002, but looking further out, when the economy, presumably, improves?

Mr. Veerappan: Sure. I think if you’re willing to look further out, I would focus a lot of attention on the wireless side of the arena, and we would focus on wireless infrastructure players. The two names that come to mind right away are, at the enterprise level, Intersil (Nasdaq:ISIL), and at the infrastructure level, Stanford Microdevices (Nasdaq:SMDI).

TWST: What distinguishes these companies?

Mr. Veerappan: Intersil owns the wireless LAN market, at this point in time, and is extremely well positioned to move beyond the wireless LAN market, in my view, to attack further portions of the wireless network. Stanford Microdevices is an RF player, focused on wireless infrastructure such as base stations and base station controllers. As these markets start to mature and the deployment cycle for 2.5G and 3G base stations, more likely 2.5G base stations, accelerates, let’s say beginning 2003, I think these companies could prove to be beneficiaries. Micrel is a classic beneficiary of the steady but profitable growth that exists in the analog/mixed-signal domain.

TWST: Is there a message that you would like to leave with investors?

Mr. Veerappan: The message that I would leave investors with is to pick your spots and focus on names that are going to emerge out of this downturn as survivors, because survival, at the end of the day, is victory. So focus on those names as long-term investments.

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.