While market research firm Dataquest has diminished its previous 1998 forecast for the semiconductor industry by $15 billion in light of the Asian financial crisis, Harris Semiconductor has experienced a positive second quarter, formed two new business units and introduced new products capable of transmitting data at 11 megabits per second.
“Fortunately not much of our business comes from Asia,” said Brent Dietz, a spokesman for Harris. “It will have a negative impact, but we’re headed to where we were last year-with sales even higher than last.” Dietz added that good sales in Europe and North America have somewhat offset the effect of below-average performance in the Asia-Pacific region.
Dataquest, a market research unit of Gartner Group Inc., recently re-evaluated all the markets within the industry because of the volatile situation in Asia. Dataquest concluded the market is likely to reach approximately $160 billion by the end of 1998, down from its previous forecast of $175 billion, and also predicted growth of 7 percent vs. its previous forecast of 17 percent. However, Harris showed essentially flat year-to-year growth, and improvements in both revenues and net income for the second quarter ended Jan. 2.
“Difficult market conditions caused by the Asian economic crisis impacted each of our businesses during the second quarter,” Phillip W. Farmer, chairman and chief executive officer of Harris, said in the company’s Jan. 21 earnings release. “These conditions are not likely to improve in the near term. Worldwide market reaction to the Asian crisis will continue to place severe pricing pressures on our sectors, particularly semiconductor.”
Harris reported net income of $52.7 million for the second quarter, 16 percent more than the $45.5 million reported a year earlier. Sales for the quarter rose to $970 million, about half of which were communications and semiconductor sales. Harris has $1.95 billion in sales for the first six months of fiscal 1998.
The Asian economic crisis “has really been not as significant as you may hear in the rest of the trade journals,” said Carleton Smith, vice president of Asian sales for Harris. “December was definitely weak. It has had some impact in order rates, but we have seen a comeback in January, and it’s looking better in February.
“Distributors became quite nervous about the rate of exchange and stopped ordering … but the currency exchange rate is stabilizing, and in the last six weeks we’ve seen the orders come back,” Smith said. “We should come out of this just fine.” Smith said around 15 percent of Harris’ business comes from the Asia-Pacific region.
The Taiwan and Singapore markets remain strong for Harris, said Smith, while South Korea has seen a “slight downturn,” but the company continues to do well there. “Asia is a manufacturing country, and they don’t make all the components they need in Asia,” Smith explained. “They have to buy from us. The only way out of this is to build products and export them,” which requires the manufacturers to buy chipsets and other parts from the United States and Europe.
Smith also pointed out that Harris is not in direct competition with some products manufactured in Asia, such as Dynamic Random Access Memory chips. Dataquest attributed as much as one-third of its forecast reduction to the potential lower costs of DRAM manufacturing in South Korea and the devaluation of the won. Dietz and Smith said Harris’ proprietary products, such as the Prism chipset used in wireless local area networks and several Application Specific Integrated Circuit products, are doing well.
The company’s wireless product line has been in the spotlight recently with the introduction of the high-speed data transmission products. The Prism chipset includes Harris’ new baseband processor, the HFA3860, which will allow consumers to transfer video, data and voice signals at a speed comparable with wired Ethernet systems, said Harris. The Prism chipset, based on direct sequence spread spectrum technology, is being used in products co-developed by Harris and Applied Integration Corp. for MPEG video data transmission.
“Video conferencing has always had bandwidth as an issue,” said Fred Pingal, president of Applied Integration. “As networks become faster, video will explode.” The Prism chipset also is being used in GRE America Inc.’s new communications module, the Gina 2001, designed specifically for original equipment manufacturers.
Harris formed the Communications Business and the Power Business to address the company’s increasing drive into these growth markets. Ron Van Dell will head up the Communications Business, which combines the wireless, signal processing and multimedia product lines. Van Dell joined Harris in 1995 as vice president and general manager of worldwide marketing and sales.
Harris Semiconductor’s Power Business will be headed by Greg Williams, vice president and general manager. The new business combines the discrete and intelligent power product lines.
