Technical Insight
Leading US GaAs fabs issue profit warnings (Headline News)
Profit warnings from six major GaAs IC companies in the first two weeks of March lent support to CIBC s theory that the GaAs industry is entering into a recession (see "GaAs industry warned of uncertain future", page 7). On March 7, Alpha Industries announced that its revenues were slowing by around 20% and that its profit targets for the March quarter would be slashed from around 20 cents per share to 5 cents. The company cited slowing demand from both handset and infrastructure customers. On March 8, RF Micro Devices announced for the second time that it would not meet Wall Street expectations for the March quarter. The company s figures had already been revised downward after a similar warning on January 16, and this second revision indicates that the situation is worse than previously believed. RFMD cited slowing demand from handset, infrastructure and broadband customers, and said that it is seeing some orders pushed out as well as some cancellations. Their new forecast is a loss of 34 cents per share, down from the January projection of 2 cents per share profit. Revenue is expected to be $55 million, down from $85 million in the same period last year. Fabless supplier Stanford Microdevices has also been rattled by the turmoil in the wireless industry. The company now anticipates first-quarter net revenues of $7.68.0 million, which is 25% lower than previous projections. Analysts had been expecting income of around 5 cents per share for the quarter; the company now says that they expect to merely break-even. The company blamed "the actions and plans of the worldwide telecommunications industry to reduce component inventory levels and planned equipment production volumes, and to delay the build-out of new wireless network infrastructure." The wireless area is not the only disappointment for GaAs makers. TriQuint Semiconductor lowered its expectations, indicating that it expects to show little or no growth in revenue in the first three quarters of this year. The company reported slowness in most areas, but fiber optics, which accounted for 29% of TriQuint s revenue in the December quarter, was noted as particularly weak. Wireless sales, which accounted for 48% of revenue in the fourth quarter, were also down. Unit volumes remain high, with analysts indicating that TriQuint is using nearly all of its capacity. ASPs, however, have dropped leading to significant decreases in revenue. Slowing demand for CATV components is clouding the outlook for Anadigics. On March 13 the company confirmed that while it is on track to meet estimates of $28.5 million in first-quarter revenues, there may be a drop-off of as much as 25% in the June quarter. A loss per share of 14 cents for the first quarter and 25 cents in the second quarter is expected, due primarily to substantially reduced gross margins because of lower fab utilization. According to the company s statement, "gross margins are expected to temporarily dip into the 2530% range for the first half of 2001". Bami Bastani, president and CEO of Anadigics, predicted a recovery by the end of this year. And Vitesse, the leading manufacturer of digital GaAs ICs, warned that revenue expectations for the March quarter should be lowered from $180190 million to $150160 million and projected net income would likely be 2122 cents per share, 5 cents lower than previously expected. The company cited weakness in its communications and data storage businesses, saying that it continues to see strong growth in its network processor, switch fabric and OC-192 module product lines.
