Chips

SARA FISHER Staff Reporter Despite high hopes for another bullish year, semiconductor companies instead are reporting a flurry of lower-than-expected earnings and even layoffs. The reason: Global semiconductor sales fell by 12.7 percent in May, according to the Semiconductor Industry Association. And that’s hitting close to home, because the L.A.-Long Beach metro area is home to 81 semiconductor-related companies, according to Dun & Bradstreet, making it second nationwide to the San Francisco Bay Area (including Silicon Valley) with 492. “We have not seen an impact yet, but we do expect our business to slow down in the second half of the year,” said Klaus Schuegraf, president of Torrance-based Tystar Corp., which makes a furnace used in the manufacture of silicon chips and related products. “We are working very hard right now in industries other than computer chips, such as fiber optics.” Semiconductors are the key components in chips, like the Pentium chips used in personal computers. But semiconductors are also used in wireless telecommunications, hand-held electronic devices and numerous other products. Analysts are braced for a possible dip in earnings at several Southern California semiconductor companies, including El Segundo-based International Rectifier Corp. and Rockwell Semiconductor Systems, which has operations in Orange and Ventura counties and is spinning off from the former aerospace giant. Monthly sales sank the most dramatically in Japan, where May year-to-year semiconductor sales fell by 19.3 percent. May sales in North and South America fell by 17.9 percent. Due to the Asian economic problems, a worldwide glut of semiconductors and downward price pressure on computer chips, the Semiconductor Industry Association projects worldwide annual sales to decline by 1.8 percent. Last fall, it had predicted 17 percent growth in the industry for 1998. “Back in January, people (in the semiconductor industry) said that they were immune to the global economy problems,” said Will Strauss, an analyst and president of Forward Concepts Co. “They now know that it won’t be a banner year for semiconductors and we haven’t seen the bottom yet. It’s going to get worse.”