SUNNYVALE, California (Reuters) - Short lead times from manufacturing customers are making it tough to predict end demand for microchips and hard to say whether an inventory correction is bottoming out, the chief executive of Maxim Integrated Products said.
Struggling economies in the United States and Europe have crimped demand for electronics and in recent months pushed many manufacturers to reduce high inventories of chips and other components.
Investors are looking for signs of whether the inventory adjustment is ending or could drag on due to economic uncertainty.
“I know some companies have called the bottom as the December quarter for this inventory correction. I wouldn’t have said that with that much confidence. We really don’t know,” Maxim Chief Executive Tunc Doluca told Reuters on Wednesday.
Maxim focuses on creating and combining specialized analog chips that fetch higher prices but sell in lower quantities than more commoditized chips made by some other analog companies.
Analog chips translate real-world phenomena like sound, temperature and light into the ones and zeros that make up digital computer language. Part of their growth over the next few years is expected to come from smartphones and tablets, where their use in regulating electricity consumption is crucial to longer battery life.
Samsung Electronics is a top Maxim customer and the success of its smartphones competing against Apple’s iPhones has helped make Maxim’s mobile business its fastest growing. Components going into smartphones account for nearly a third of Maxim’s revenue.
Soaring sales of smartphones and tablets appear to be mostly immune to the slowdown, Doluca said.
“With our customers we don’t see an inventory build of phones with our components,” he said.
Earlier this month, British chip designer ARM Holdings, whose technology is widely licensed by smartphone makers, said it was optimistic that reductions in inventory by device makers would be short lived.
Market research firm Gartner has said it expected the chip inventory correction to continue to dampen sales prospects for at least the reminder of the year before sequential growth can return in 2012.
Maxim has said it expects its revenue to decline about 6 percent in the current quarter compared with the prior quarter as customers trim inventory.
Partly due to economic uncertainty, Maxim’s lead times with its customers have been trimmed to eight or nine weeks from over 12 weeks a few months ago, Doluca said. That has made it harder for Maxim to get a glimpse of its customers’ expected future demand.
Maxim’s TacTouch touchscreen controller launched last year has yet to appear in any major consumer products or lead to meaningful revenue. The company plans to add the controller to the menu of technologies it can package for customers on a single chip, Doluca said.
“It’s well received by customers, but as with anything else we’re not the first suppliers in the market ... It’s going to take some time,” he said.
Reporting by Noel Randewich; Editing by Gary Hill