* Holiday chip demand threatened by slow economy
* Seasonal uptick could be small
* Smartphone expectations come down
By Noel Randewich
SAN FRANCISCO, July 26 Makers of chips for TVs,
game consoles and other consumer electronics aren't expecting
much for Christmas, but insatiable demand for high-end gadgets
like Apple's (AAPL.O) iPad will likely deliver some cheer.
Texas Instruments TXN.N, Intel (INTC.O) and Qualcomm
(QCOM.O) are normally busy this time of year churning out
microchips for consumer electronics -- typically the hottest
tickets during the annual holiday season from November to
But persistently high U.S. unemployment and the risk of
further economic slowdown, along with the danger of a European
financial crisis, have soured many manufacturers' moods,
according to a growing chorus of chip executives.
Even blockbuster expectations for smartphones have cooled
"Wherever we look right now there's macroeconomic
uncertainty," ARM Holdings ARM.L Chief Executive Warren East
told analysts on a conference call on Tuesday. "There is
uncertainty about consumer expenditure."
Cambridge, England-based ARM, whose chip technology is
widely used in smartphones and tablets, warned that an uptick
in chip manufacturing typically seen ahead of Christmas might
be smaller than normal this year.
"Consumer spending is cautious," said Longbow Research
analyst JoAnne Feeney. "(Product manufacturers) are in a
wait-and-see holding pattern. They want to see whether demand
materializes before they build more televisions, set-top boxes
Last week, Intel cut its outlook for 2011 PC shipments and
said growth would come from China and other emerging markets
instead of the United States or Europe.
3M Co (MMM.N) said on Tuesday its display and graphics
segment fell in the June quarter, reflecting less demand for
LCD TVs and a tighter consumer electronics market.
Because many of its products are low-cost, quickly used and
sold all over the world, 3M is a barometer of global industrial
Texas Instruments said on Monday computing and consumer
electronics customers concerned about the economy were ordering
fewer chips than usual for this time of year. It said store
shelves could fill up later than usual this holiday shopping
As well as tough economic times, ripples from Japan's
earthquake in March are still affecting the industry.
Electronics manufacturers that deliberately ordered extra
components following the disaster are now less worried about
shortages and are beginning to work through their inventories,
leading to fewer new orders, said CLSA analyst Srini Pajjuri.
Consumer appetite for Apple's smartphones is as strong as
ever, but growth at competitors like Nokia NOK1V.HE, Research
in Motion RIM.TO and LG Electronics (066570.KS) has
And a slew of tablets meant to compete with the iPad have
failed to take off, adding to inventories of chips that had
been manufactured in anticipation of higher sales but have gone
"Demand for smartphones and tablets is OK, but it's not as
good as people were thinking," said MKM Partners analyst Daniel
Berenbaum. "Plus smartphones and feature phones have a big
headwind in Europe, which is a very important market."
Smartphone shipments this year will grow about 38 percent,
according to market research firm IHS iSuppli. Analysts earlier
this year had forecast expansion of around 50 percent.
Shares of Broadcom BRCM.O, which makes Bluetooth and
other wireless chips and counts Apple as a key customer, soared
9 percent after the Irvine, California company gave a
rosier-than-expected quarterly outlook.
Some investors expect larger wireless chipmaker Qualcomm to
supply key chips for Apple's next iPhone and to continue to
increase its content in Apple's devices.
Qualcomm last week raised its guidance for the current
quarter, although Chief Financial Officer William Keitel warned
that economic uncertainty was making customers "extra
Chipmakers that do their own manufacturing, instead of
contracting it out, and that have inventories on hand, may be
able to respond in time to any last-minute holiday orders
should the outlook for consumer demand improve.
Texas Instruments has said there is still time to ramp up
ahead of the year-end shopping season and that its factories
will be ready if demand improves.
"Christmas could still come if consumers indicate they're
going to spend, Longbow's Feeney said.
(Editing by Steve Orlofsky)