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Microchip glut might be over

February 21, 2007|From Reuters

SAN FRANCISCO — The U.S. semiconductor industry appears to have worked through an inventory glut that had hurt fourth-quarter earnings and sent shares tumbling.

Analysts said they expected shares of companies that make microchips to rise in the coming months as orders increased from customers that were using up inventory in the fourth quarter.

"I am confident that we are shipping less than actual end demand, which is another way of saying we are working down inventories at customers," said Doug Freedman, an analyst at American Technology Research Inc. He expected chip shares to rise 10% to 15% in the near term.

The last quarter's results of many microchip companies had failed to live up to their own forecasts and Wall Street expectations, but analysts said the outlooks provided by most firms were more realistic.

The Semiconductor Industry Assn. expects sales of all kinds of semiconductors, such as computer processors, memory chips and wireless processors for mobile telephones, to grow 10% this year to $274 billion, gaining speed from last year's increase of almost 9%.

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