Expert Sees Slow Recovery for Semiconductor Firms
The semiconductor industry, which suffered its worst year ever in 1985, should begin to rebound this year, but the climb back to prosperity will be much slower than the fall, a leading analyst told industry executives Tuesday.
The turnaround will be so slow, predicted Jack Beedle, president of In-Stat Inc. of Scottsdale, Ariz., that sales for 1986 will still be nearly 4% below the depressed levels of 1985 when the nation’s semiconductor makers sold an estimated $8 billion worth of silicon chips and other electronic parts.
Beedle’s predictions before the Semiconductor Equipment and Materials Institute meeting in Newport Beach offered the most pessimistic outlook yet for the volatile semiconductor market, the segment of the electronics industry most subject to feast-or-famine cycles. Other forecasters have predicted 1986 sales increases of 5% to 25% for the tiny components that can be found in everything from supercomputers to dishwashers.
Key Ratio Rises
Despite Beedle’s dire forecast, the Semiconductor Industry Assn. reported this month that its “book-to-bill” ratio, its key indicator of incoming sales, rose to 0.98 in December, its highest point in 16 months. The ratio means that, for every $98 worth of new orders, or bookings, manufacturers shipped, or billed, $100 worth of products. The figure had been hovering around 0.65 for much of 1985, showing how few new orders were being received.
Beedle, who claims to have forecast earlier boom-bust waves, said the industry fell so steeply in 1985--an estimated 31% by his count--that it will take the next two years for semiconductor manufacturers to return to the high-flying, $11.5-billion sales of 1984.
Nevertheless, Beedle said semiconductor makers, already battered by losses and layoffs, have seen the worst of the cycle and should enjoy modest profits this year.
“Most companies are lean and mean by this time,” Beedle said, referring to the steady stream of layoffs and write-offs in 1985. “It won’t take much to get many of them back to profitability.”
Beedle and other analysts agreed that the industry’s biggest growth spurt won’t come until the final months of 1986, after their customers absorb existing inventories and design products using some of the newer models of silicon chips.
He predicted that sales of computers, one of the largest markets for semiconductors, would increase nearly 3% to $54.4 billion this year. Communications products, another major market for chips, he said, would rise an estimated 7%.
