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Broadcom CEO says bar is low for European demand
December 6, 2011 / 9:21 PM / 6 years ago

Broadcom CEO says bar is low for European demand

* Expectations for Europe already lowered

* Says demand should stay strong in parts of Europe

* CEO points to risk that crisis could spread

By Noel Randewich and Poornima Gupta

SAN FRANCISCO, Dec 6 (Reuters) - Chipmaker Broadcom’s chief executive downplayed the risk to tech sales from Europe’s debt crisis, saying expectations have already been lowered and that demand would stay strong in the long term.

Spending on consumer electronics and other technology has languished in recent months and experts fear that Europe’s debt crisis could spread to the United States and Asia and cripple already-struggling economies around the world.

“To the extent it would have an impact on (the United States and Asia) it matters. But remember, expectations are already fairly low,” Broadcom Chief Executive Officer Scott McGregor said of the debt crisis. “I think a lot of the concern of Europe is already factored into people’s plans.”

Broadcom, which makes chips used in cellphones and networking equipment, has already warned that its sales would fall as much as 13 percent in the current quarter compared to the previous quarter due to weak demand in Europe and the United States.

Sales of smartphones and tablets have been a relative bright spot among consumer products but even those are showing some signs of softness.

Taiwan’s HTC Corp saw its sales fall 30 percent in November from a month before as the world’s No. 4 smartphone brand struggled to compete against bigger rivals Apple and Samsung Electronics .

Major Broadcom customers in Europe like Nokia and Alcatel sell a big chunk of their products in the United States and Asia, making them less sensitive to low European demand, McGregor said.

He also said he expects demand to remain healthy in European countries not struggling with fiscal troubles.

“At the end of the day, I think there will still be a lot of consumer demand in Europe and a lot of healthy economies in many of those countries,” he said.

Worries about slow demand have pushed many manufacturers in recent months to reduce high inventories of chips supplied by Broadcom and its competitors.

In a sign that confidence is evaporating at factories and businesses across Europe, investment there was flat in the third quarter for the second quarter running and companies sold down inventories.

McGregor declined to say when he expects Broadcom’s customers to stop trimming their stocks of microchips.

French chipmaker STMicroelectronics has said it expects to return to normal business conditions in the second quarter of 2012 after inventory is cleared.

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