Microchip Makers Admit Their Faults

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January 9, 2009

There’s no mincing words when it comes to microchip makers right now… revenues and profits are off for the likes of Standard Microsystems (SMSC) and Intel (INTC). How do I know? Because they told us so. As I discussed in my recent article for The Motley Fool (link below), these guys had a pretty low bar to begin with last quarter, yet still failed to meet those low expectations.

My primary concern wasn’t that one or two chip makers was waving a red flag, and not just for last quarter. They were all waving a red flag, and are waving it in advance of at least the next quarter.

And it’s not just chip makers (which includes Texas Instrument and AMD). It’s all computer parts makers, including memory manufacturers like Micron (MU).

In fact, Micron provided more of the ugly details than anyone else did, admitting that there’s just too much inventory, and too much competition, and not enough demand (demand, of course, has taken a hit thanks to the recession).

Standard Microsystem agreed on the too-much-inventory front, though not as firmly. SMSC, however, did do something very few others did in any great detail. Standard Microsystems gave us a very blunt - almost a little too blunt - outlook for the coming quarter. Their forecast could shock you, and not in a good way.

I’m still generally bullish for 2009, but this segment is set to struggle for at least another quarter.