NVIDIA and Micron navigate volatile semiconductor industry

NEW YORK, USA: Analyst firms are forecasting modest growth in the semiconductor industry, as sluggish PC sales and economic setbacks have weakened demand. With old revenue drivers on the downswing, chipmakers such as Micron Technology and NVIDIA are making attempts to reinvent themselves. The Paragon Report examines investing opportunities in the semiconductor industry and provides equity research on NVIDIA Corp. and Micron Technology Inc.

The graphics chip market remains one of the few bright spots in the semiconductor industry. NVIDIA Corp. reported third-quarter sales and profit that topped analysts' estimates, lifted by demand for chips used by computer gamers and designers. Patrick Wang, an analyst at Evercore Partners Inc., says NVIDIA has been winning market share in sales of graphics processors for desktop PCs from Advanced Micro Devices Inc.

NVIDIA is presently trying to lessen its dependence on personal computers with a new range of chips called Tegra. The processor is meant to challenge products from Texas Instruments Inc. and Qualcomm Inc. in the market for chips that run programs in phones.

Meanwhile, in the memory chip segment, industry sources in Taiwan report that DRAM contract prices for the second half of November, due to sluggish demand from PC OEM makers, dropped by nearly 8 percent sequentially. Because the PC market is going into the traditional off-season, PC OEMs have decreased orders for DRAM, the sources indicated. In addition, tight supply of hard disk drives due to the impact of flooding in Thailand has diminished shipments of PCs and therefore demands for DRAM.

Micron Technology warned that continued oversupply of DRAM chips will weigh on margins, adding to investor worries about tepid PC sales and casting a shadow on expectations for the upcoming holiday season. Earlier last month, shares of Micron got a bump after a California jury denied Rambus Inc. billions of dollars in damages as it determined that chip-makers Micron Technology and Hynix Semiconductor didn't conspire to fix prices of memory chips in order to make products designed by Rambus more expensive.