Arizona semiconductor stocks got hammered again this week as recession fears continued to grip investors.
The semiconductor industry increasingly is driven by consumers, and investors worry that a recession could have a negative impact on sales of chip-laden cellphones, mobile computers and high-definition televisions.
The world's biggest maker of chips, Santa Clara, Calif.-based Intel Corp., has been one of the biggest losers. Intel is one of Arizona's biggest employers and employs about 10,000 people at three chip plants in Chandler. Since the first of the year, Intel's share price has fallen 28 percent.
Phoenix-based ON Semiconductor Corp. also has been hit; ON's shares are off 16 percent so far this year. Shares in Chandler's Microchip Technology Inc. have lost 9 percent of value since Jan. 1. ON has about 1,000 employees in Phoenix and Microchip employs 1,550.
Even a stellar earnings report Tuesday wasn't enough to stop the slide in Intel shares. The company reported record revenue, a 105 percent increase in operating income and a substantial jump in profit margins.
Intel President and CEO Paul Otellini called 2007 a "breakthrough year" and attributed the improved results to the company's investments in new products and its efforts to drive operating efficiencies and to reduce costs.
But the company's forecast first-quarter profit was slightly below analyst expectations and jittery investors put the stock into a tailspin. Intel dropped $2.81, or 12.4 percent, on Wednesday and lost an additional 55 cents, or 2.77 percent, on Thursday and 30 cents, or 1.55 percent, on Friday. Intel's shares closed Friday at $19, down $7.66 from the $26.66 close Dec. 31, 2007.
Tony Massimini, chief of technology at Phoenix market research firm Semico, believes the market has overacted.
"Intel has its best quarter ever, and because some of their numbers were slightly below expectations, they got beat up," he said.
Massimini acknowledged that consumer spending is slowing but noted that sales of laptops and cellphones remain strong.
"Consumer spending may be down," he said, "but when they did buy, they bought electronic equipment."
While most analysts predict sales growth in the mid-single digits for the semiconductor industry this year, Phoenix's Semico sees 12 percent growth.
Ironically, a huge loss reported Thursday by Intel competitor Advanced Micro Devices Inc. gave most chip stocks, with exception of Intel, a boost on Friday.
In the fourth quarter, Advanced Micro lost $1.77 billion after a $1.67 billion write-down related to its acquisition of ATI Technologies Inc. in 2006. Unlike Intel, the results were better than analysts expected, and the stock jumped more than 10 percent Friday.
Shares in Microchip, ON and Marvell Technology Group also got a boost by Advanced Micro's results. Marvell bought Intel's communications chip business, which had a significant presence in Chandler.
Since Jan. 1, Marvell shares are down 22 percent.
