Many small chip makers see low fourth quarter results

On the morning of November 3, a number of small chip companies issued warnings that the macro economy might squeeze consumer demand in the fourth quarter, which also confirmed the signal released last week by large chip companies such as Texas Instruments.

On Wednesday, small-chip companies EZchip Semiconductor and Silicon Motion Technology both posted an unexpected third-quarter result, but both companies expect fourth-quarter earnings to decline sequentially.

Due to the disruption of the supply chain caused by the earthquake in Japan in March this year and the adjustment of the inventory of related companies, the demand of the entire chip industry fell, making global chip manufacturers and wafer manufacturers face difficulties.

Due to reduced spending and slower PC shipment growth, the entire semiconductor industry, including STMicroelectronics, CSR, and Broadcom, has shown signs of slowing sales. Gartner has also lowered its PC shipment forecast for 2011 to 9.3%, down from 14% last year.

EZchip provides Ethernet processors for network devices. The company said that market uncertainty and potential recession signals caused contract manufacturers to cut inventory.

American investment company Chardan Capital Markets analyst Jay Srivatsa said: "The large customers of EZchip, such as Juniper Networks and Cisco, all stated that their end markets are declining."

"This stems from operators such as AT&T and Verizon Telecom. As Juniper and Cisco's end-users, they are also concerned about the macroeconomic environment." Srivatsa said.

Silicon Motion Technology also expects fourth-quarter revenue to be flat or down 10% from the previous quarter.

On Tuesday, the larger chip maker Atmel expects fourth-quarter sales and margins to show weakness, mainly due to low sales of touch-screen controllers.

The Dow Jones US Semiconductor Index fell 5% on Wednesday, and the index has fallen 11% in the past three months.