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After one of the deepest downturns in chip production in recent memory, area semiconductor firms began to see orders for products and equipment pick up in the third quarter. But firms are reluctant to say the bad times are over for the beleaguered industry, portending a slow and bumpy recovery to post-recession sales and employment levels.
Global semiconductor sales topped $21.7 billion in October, up 5.1 percent from September, on seasonally strong sales of electronics ahead of the holidays, according to the Semiconductor Industry Association. The trade group brightened its forecast for 2009 last month, estimating global sales of semiconductors will reach $219.7 billion from $248.6 billion in 2008.
Yet the figures and executive commentary indicate the recovery is mixed at best, with stronger-than-expected sales of personal computers and smartphones — about 60 percent of the chip demand — buoying many parts of the sector, including certain types of memory and other industrial applications. And the SIA’s sales projection for 2010 — $242.1 million — is below 2008 levels.
Norwood-based Analog Devices Inc. (NYSE: ADI), the state’s largest semiconductor company by revenue, saw its fiscal fourth-quarter sales ending Oct. 31 rise 16 percent sequentially to $572 million on a 38 percent jump in consumer segments and 17 percent rise in industrial chip sales. In a statement accompanying earnings last month, Analog Devices CEO Jerald Fishman said the “atypically strong growth” in the quarter could be attributed, in part, to gradual improvements in the economy and a demand from customers to replenish supply.
While Fishman and other executives are bullish on long-term prospects, they expect some of the high-growth areas in the industrial segment — including automotive and health care — and in the consumer segments to be flat to down compared with the first quarter, although revenue should be up about 20 percent compared with the same period last year.
“It’s impossible to make predictions,” Analog Devices spokeswoman Maria Tagliaferro said. “You always have to find the balance of confidence in the future with the realities of the current environment.”
That conservative approach by Analog and many of its peers trickles down to the makers of equipment used in semiconductor manufacturing. Varian Semiconductor Equipment Associates, the Gloucester maker of ion implantation equipment (Nasdaq: VSEA), reported fourth-quarter revenue of $117.5 million, up 60 percent sequentially, and posted its first net income, $7.6 million, since the fourth quarter of 2008.
Teradyne Inc., the North Reading maker of testing equipment for semiconductor firms (NYSE: TER), reported third-quarter revenue of $262.2 million, up from $169.6 million in the second quarter but down from $297.3 million in the same period a year ago.
“They are being very cautious in their inventory and they’re buying what they need and when they need it,” said Andy Blanchard, vice president of corporate relations.
He added the company is confident next year will be better in terms of revenue and profits than this year, but characterized the near-term recovery as lumpy.
Hiring prospects
One question left unanswered is how much of a recovery there will need to be before local semiconductor companies begin hiring back workers let go earlier this year. Varian let go of about a third of its workforce, both contract and full-time employees, in 2008 and instituted furloughs and pay freezes in 2009. Teradyne shed more than 500 jobs in January.
Blanchard said Teradyne “doesn’t have plans to meaningfully expand head count” in the near future, but did not rule out hiring if conditions change. ADI officials would not comment on hiring, but noted the company’s manufacturing consolidation program over the past few years and a 50 percent utilization rate give it room to add capacity if called upon.
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