Chip designers are cutting their production and production orders for both Q4 2008 and Q1 2009, according to Craig Berger, chip analyst at Friedman Billings Ramsey. The suppliers believe that the demand towards various devices will be lower in the next four months at least, therefore, it does not make sense to keep at the current production levels and stockpile chips.

Barron’s Online web-site has published a rundown on Mr. Berger’s outlook for the number of wafer starts in the next few quarters from key chip companies:

• Broadcom: production predicted to be down 13% in the fourth quarter from the third quarter, worse than previous estimate of down 8%; for Q1 2009 the analyst sees a further 17% cut.
• Marvell: for Q4 production is expected to be down 18%, versus previous estimate of down 13%. For Q1 2009, wafer starts decline is foreseen to be another 10%.
• Texas Instruments: production expected to decrease 18% for the fourth quarter, no change compared to previous estimates. In the first quarter wafer starts will be down another 20%.
• Nvidia: production expected to be down 25% in Q4 2008, versus previous estimate of down 22%. In Q1 wafer starts projected to crumble by another 20%.
• Qualcomm: in the fourth quarter production predicted to decrease by 30%, versus 15% fall down estimated previously. Wafer starts expected to be “flattish” in Q1.
• Xilinx: Mr. Berger believes that Xilinx could be a relative outperformer, with production down 10% in Q4, and another 12% in the first quarter of 2009.

The expected decrease of the number of wafer starts is hardly surprising after the world’s largest foundry company Taiwan Semiconductor Manufacturing Co. revised its fourth quarter business outlook by lowering estimated revenue and profits “due to a reduction of wafer shipment resulting from continuing weakness in global economic conditions”.

TSMC now expects fourth-quarter revenue to be between NT$63 billion and NT$65 billion ($1.883 - $1.943 billion), lower than the previous expectation of between NT$69 billion and NT$71 billion ($2.063 billion - $2.123 billion). The company’s expectation for fourth-quarter gross profit margin is now between 30% and 32%, and operating profit margin is between 17% and 19%, lower than the previous guidance by 4 percentage points each.

Intel Corp. also reduced its expectations for the ongoing quarter several weeks ago citing global economic slump.

Tags: Semiconductors, Broadcom, Marvell, Nvidia, Qualcomm, Texas Instruments, Xilinx, TSMC, Intel, AMD