Fairchild's Pond Sees Sluggish End Of Year

The industry's current inventory correction should make quarter-to-quarter growth "modest" into the first quarter of next year, when some stability will return and help the industry enjoy single-digit revenue growth in 2005, Fairchild Semiconductor's chief executive said Thursday (Sept. 23).

Kirk Pond, in an interview with EE Times, said he initially noticed customer backlog "getting really choppy" in May. "As we dug into it, we discovered people were becoming more cautious about the second half of '04, and they were beginning to deal with inventory building."

"We talked about it in at an analysts conference, and everybody waved their arms and said, 'there must be something wrong with Fairchild because we're not hearing that from anyone else,'" Pond said. "And then sure enough by June-July everybody was saying that."

Pond said he saw "the classic phenomenon where 10 people think they're going to get 20 percent of the market" and buy components based on that hope. In addition, warnings from Wal-Mart on lackluster back-to-school sales and diminished expectations on Christmas sales are dampening enthusiasm, he said.

"Is the cycle over? No. Are we going through an inventory correction? Yes. But this is going to keep quarter to quarter change pretty modest through fourth quarter '04 and first quarter '05," Pond said.Pond said he "absolutely" agrees with analysts' forecasts of single-digit semiconductor revenue growth next year.

The industry is burning through backlog in the third quarter and even with a modest bookings recovery in the fourth quarter, "we still can't fill those backlog holes back up so we've mathematically set up a situation where first quarter of '05 is going to be below fourth quarter '04 and then second quarter will be up a little, and then the third quarter will down a little because of summer then we'll see a bounce in fourth quarter."

Using that logic, "you see a five- to six- to seven-percent growth in '05 over '04," he predicted.