Chip Industry Expected to Post Robust 2nd-Quarter Gains

Semiconductor companies, whose bullish demand forecasts have sent their stocks soaring, are expected to report second-quarter earnings gains ranging from 10% to 100%, analysts say.

Such gains are akin to what would be expected from young firms just starting to profit or from industries just entering an up cycle, said Rick Whittington of Soundview Financial.

But Intel Corp., a $1.2-billion company, is expected to post at least a 37% gain to between $1 and $1.10 a share--and the semiconductor industry has been booming for three years already.

Demand for chips has been accelerating because of proliferating sales of personal computers, cellular phones and a wide variety of other electronic equipment.

In addition, the typical personal computer and most other electronic devices now contain more chips than in years past.

“The chip industry is growing from a $140-billion industry this year to a $350-billion industry by the end of the decade,” says Dan Klesken of Robertson, Stephens & Co.

That astounding projected growth indicates that the makers of semiconductor manufacturing equipment are in an even better position than the semiconductor makers themselves. Chip makers are investing heavily in new equipment and capacity.

Klesken says he expects about $200 billion worth of new equipment to be put in place between now and the year 2000.