Semiconductor Industry Demonstrating Effects of Depression

By Andrew Pollack, N. Y. T. N. S. | THE JOURNAL RECORD, October 9, 1985 | Go to article overview

Semiconductor Industry Demonstrating Effects of Depression


Andrew Pollack, N. Y. T. N. S., THE JOURNAL RECORD


SAN FRANCISCO - Only days after its trade association predicted that business would soon improve, the semiconductor industry is demonstrating again the effects of a relentless yearlong depression.

National Semiconductor Corp. reported last week a loss of $53.5 million for its first fiscal quarter, the largest in its history and the worst so far in the industry's yearlong slump.

The report followed announcements earlier this week of austerity measures that included pay cuts by the Intel Corp. and layoffs and salary reductions by the semiconductor operations of Motorola Inc.

The industry that makes the silicon chips used in computers and other electronic equipment has been mired in a slump caused by persistent excess inventories, slowing computer sales, and severe competition from Japan.

As for the outlook for a turnaround, ""it's like waiting for Godot,'' said John J. Lazlo Jr., semiconductor industry analyst for Morgan Stanley & Co. ""I don't look for any material improvement over the short term.''

Charles E. Sporck, National Semiconductor's president and chief executive, appeared to agree in his statement last week: ""We have recently experienced a marginal improvement in semiconductor orderrates,'' he said. ""But until we have a significant and sustained improvements in those rates, our financial performance will continue to suffer.''

National's loss, which had been expected, compares with a profit of $35.9 million, or 40 cents a share, in the first fiscal quarter of last year. Revenues in the 1985 quarter, which ended Sept. 22,plunged 20 percent, to $423.4 million, from $529 million.

National, based in Santa Clara, Calif., also said it would close its operations for seven days during Christmas to save money. The company this year has already laid off 1,300 in the United States and others overseas. It has also instituted hiring freezes, other temporary plant shutdowns and capital spending cuts.

Analysts expect virtually all other semiconductor companies to report operating losses for the third calendar quarter and some to report losses for the fourth quarter as well.

National's loss is as large as it is because of its heavy reliance on commodity products that have been affected most by price wars, and because of the company's heavy expenditures to modernize itsfacilities. Moreover, third-quarter operating losses for companies such as Intel and Advanced Micro Devices might be partly or completely offset by interest income or tax credits, while semiconductor losses for Texas Instruments and Motorola might be counterbalanced by earnings from other operations.

Still, these companies are all acting to reduce the losses. Intel recently instituted pay cuts of 4 to 8 percent for its entire U.S. work force for the remainder of this year and said it would shutits operations for six days during the Christmas season.

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