Intel's fourth-quarter forecast misses and gloomy outlook have confirmed semiconductor investors' worst fears. Intel's main market is PCs, but the hit to sentiment triggered a further sell-off across the UK's mobile-oriented chip stocks. Apple's failure to unveil a new iPhone at its Macworld conference also compounds concerns of weaker consumer spending ahead of the fourth-quarter reporting season.
London's first to warn was multimedia chip designer Arc International, which said that contract delays would lead to higher than expected losses. "There's clearly a more parsimonious licensing environment in the US," says Lansbanki's Dan Ridsdale. "People are more hesitant in signing licensing deals." That could also affect Imagination Technologies, he says.
Chip design leader Arm could be susceptible to the same trends." Arm is a momentum-driven stock and momentum in the industry Arm serves is very negative," says Robert Sanders of Dresdner Kleinwort, highlighting profit warnings right through the mobile handset supply chain. Arm's share price held up for much of 2007, but Mr Sanders says that the company was forced to cut operating expenditure to protect earnings from the impact of lower sales.
In spite of macro economic concerns, both analysts still like Wolfson Microelectronics, not least because it is more difficult for new entrants to break into its analog chip market. By contrast, CSR's challenge from Broadcom has demonstrated the relative ease with which new competition can emerge in digital chips such as Bluetooth.
"Rising demand for hi-fi quality audio in consumer electronics is a well-established and strong structural trend," says Mr Sanders. "There's nowhere else credible where people can go apart from Wolfson." But, the risk is that Wolfson's customers could switch to lower-quality rivals in tighter times.
