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The semiconductor industry has indeed entered a recession that will last at least until the second half of this year and potentially longer if the national economy should falter in the meantime, industry analysts say.
"I think we're in a recession but one of short-term duration," says Steve Szirom, president of HTE Management Inc., a Scotts Valley-based semiconductor market researcher.
"Yes, you could say there is a minirecession occurring within the industry," agrees Daniel Klesken, a semiconductor stock analyst for Montgomery Securities in San Francisco.
As the downturn in the semiconductor industry drags on with no clear end in sight, several other facts are becoming apparent. Analysts foresee the current oversupply of chips causing a fairly long-term erosion in prices. The drop in chip prices, in particular for the 64K dynamic RAM, has also accelerated the crossover to the next more powerful generation, the 256K chip. System designers may begin incorporating the 256K into new designs as early as the second quarter of this year, analysts say.
Also, the semiconductor slump is causing chip manufacturers to cut back on expenditures in an effort to protect their profit margins. These cutbacks, analysts say, make it more likely that the boom-and-bust cycle that has dogged the semiconductor industry since its inception will continue. The reduced spending may ultimately affect the manufacturers of semiconductor test equipment, who so far have gone relatively unscathed by the downturn.
Some analysts have resisted calling the current downturn in the industry a recession because unlike other slowdowns in the semiconductor industry it has not coincided with a slump in the national economy. Also, this downturn has come much sooner than expected. In the past, the industry has suffered similar periods of oversupply about once every four years. The last slump extended through most of 1981 and 1982.
But HTE Management's Szirom believes those who deny that the industry is experiencing a recession are simply being optimistic. "I think they're trying to put the best face on a difficult situation," Szirom says. Szirom predicts that semiconductor industry revenues will grow only 7 percent this year, down from 45 percent growth in 1984.
Most, if not all, of that growth will come in the second half of 1985, Szirom says.
Montgomery Securities' Klesken...