Texas Instruments, the biggest maker of chips for mobile phones, on Monday signalled an industry slowdown as it lowered its earnings forecast for the fourth quarter.
TI, considered a bellwether stock by semiconductor analysts, dropped its profit expectations from between 40 and 46 cents a share to 37 to 40 cents.
“I would say wireless has weakened further than our expectations in October,” Ron Slaymaker, head of investor relations, told an analyst conference call.
He was referring to a third-quarter results call when cell phones were already identified as TI’s main area of less-than-seasonal demand entering the fourth quarter.
TI’s biggest concentration of chips is in high-end “smart” phones using next-generation technology.
“3G continues to be an area of softness,” said Mr Slaymaker.
The Dallas-based chipmaker, number three in the world, is a key supplier of chips for Nokia and other handset-makers. It can provide an early warning of slowdowns in the industry.
The Gartner research firm last month raised its estimates for 2006 to 986m handsets being sold after 251m sales were recorded in the third quarter.
But Informa Telecoms & Media predicted growth of about 16 per cent this year would fall to 3 per cent by 2011 as markets matured.
TI said its fourth-quarter revenue expectations were in a lower range of $3.35bn to $3.50bn, down from $3.46bn to $3.75bn.
It said its expectations for semiconductors in general were broadly lower.
“We don’t believe this has bottomed yet, we’re likely to see first-quarter revenue lower than the current quarter,” said Mr Slaymaker.
He said the company was taking action by constraining costs – cutting down on travel and new hires. It was also reining in production in its factories and in the third-party foundries it used.
Despite this, its inventories had grown from the third quarter, peaking in November and on the decline since then. New orders were down and TI’s book-to-bill ratio was likely to be less than one for the current quarter.
TI shares were flat at $29.29 on the news in extended trading in New York.