Like Consumer Spending, Chip Sales Slump

Two pieces of chip news indicate the recession is indeed going to put a damper on the consumer electronics industry. In its quarterly filing with the SEC today, Intel explained that the uncertain economic climate means its revenue guidance for the fourth quarter, even at the high end, would be “an increase that is at the lower end of our seasonal trends.” And yesterday two foundries reported that semiconductor firms were cutting back on orders.

Intel plans to update investors on Dec. 4 after a few weeks of sales, but so far the chipmaker is seeing its customers worry about their own inventory levels leading into an economic downturn, which means they could stop ordering more chips from Intel. The world’s largest chip firm may also face a crunch as its suppliers are squeezed. As it notes, “There could be a number of follow-on effects from the credit crisis on Intel’s business, including insolvency of key suppliers resulting in product delays.”

On the other side of the globe, Taiwan Semiconductor Manufacturing Co., the Taiwanese foundry, said in an earnings call Thursday that orders for PC chips were off by 20 percent for the fourth quarter. Chip suppliers are adjusting their orders so they won’t have as much inventory on the books if their customers can’t sell the end devices those semiconductors go into. This is bad news for foundries, who are contract manufactures for the chip companies, but is also a worrisome indication that electronics makers see consumers pulling back. Chipmakers are the canary in the coal mine of consumer demand in today’s gadget-infused society, so lower sales there mean fewer sales further up the device chain.

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