March 11, 2008, 10:00 AM — Texas Instruments, the world's
second largest maker of chips for mobile phones, Monday lowered its guidance
for the first quarter on slumping demand for chips in higher-end mobile phones,
including 3G (third generation) handsets.
"Very recently, we received what I would call a pretty significant downward
revision in wireless customer demand," said Ron Slaymaker, a vice president
at TI, in a conference call. The decline was concentrated in 3G handsets and
base stations, he said, adding that demand for entry-level products in emerging
markets has remained consistent with initial expectations at the beginning of
the first quarter.
The company cut its revenue forecast for the first quarter to the low end of
its original guidance, to a range of US$3.21 billion to $3.35 billion compared
to its original forecast of $3.27 billion to $3.55 billion. The company also
lowered its earnings-per-share (EPS) forecast to a range of $0.41 to $0.45 cents
per share, from $0.43 to $0.49.
Investment bank Credit Suisse had expected the company to revise its first
quarter guidance to the mid-point of its earlier prediction, to earnings-per-share
of around $0.46 on revenue of around $3.41 billion.
The company's first quarter ends March 31.
TI also dispelled some rumors of reduced demand for handsets in China, at least
for mobile phones from major manufacturers. Slaymaker said TI has not seen lower
demand from customers, which include Nokia and Motorola, but could not speak
for smaller handset manufacturers in China.
The company's reduced forecast comes on the heels of a report by Gartner a
day earlier calling for chip makers to rein in production to control rising
inventories. Global inventories of semiconductors, the building blocks of electronic
devices, spiked in the fourth quarter due to lackluster fourth quarter gadget
sales and lower expectations for sales in the first quarter, Gartner said. The
market researcher blamed fears of a U.S. recession for part of the reduction
Slaymaker indicated that TI would be able to maintain its gross margins in
the quarter in part by cutting orders to contract chip makers and maintaining
its own factories at full production. Around half of the production of TI's
high-end chip products is outsourced, he said, while the remainder is done in
TI factories. The company's foundry partners include Taiwan Semiconductor Manufacturing
and China's Semiconductor Manufacturing International (SMIC).