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Chip stocks OK despite gloomy forecast

Semiconductor chip stocks dipped slightly this morning, but rebounded despite a drop in chip demand as reported by the Semiconductor Industry Association.

Semiconductor chip stocks dipped slightly this morning, but generally rebounded despite a drop in chip demand as reported by the Semiconductor Industry Association.

The SIA said its book-to-bill ratio, which measures new orders against billings in North and South America, fell to 0.85 from 0.88 in June.

For every $100 of chips shipped, chip companies received only $85 in new orders. If there aren't more new orders than chips shipped, it indicates the industry is shrinking.

Analysts, who were expecting a ratio of 0.95, were surprised at how well the stocks behaved. "You would have thought that the stocks would be heavily beaten up, but they behaved better than I expected," said Rob Chaplinsky, an analyst with Hambrecht & Quist.

Part of the reason can be attributed to the problems with the book-to-bill ratio because it ignores price cuts, which occurred across the industry in June, said Cahplinsky.

Analysts also question the validity of the book-to-bill ratio because it only covers North and South America, which includes only one-third of the world-wide market. Chip growth is more robust in Asia.

Intel closed up 1-5/8 opening at 79-7/8; AMD opened at 13-1/2 and did not change; and Texas Instruments was down a point from its opening at 47.

Related story:
A bad day for U.S. chip makers