Applied Materials Sees Order Shortfall, Dashing Hopes For Industry's Recovery; Q1 Orders Off 35% From Q4.(A)

Byline: JAMES DETAR

Applied Materials Inc. on Friday dashed hopes for even a mild near-term recovery in chip gear, saying its latest orders came in far below expectations.

The No. 1 maker of equipment used to manufacture chips surprised analysts by projecting it got $1.56 billion in new orders for its fiscal first quarter, which ended Jan. 26. That's 35% below the fourth quarter.

It had expected new orders to fall 20%, in line with the usual seasonal slowdown. Analysts and industry officials attributed the news to a cocktail of fear. There's fear of war with Iraq, continued slowness in the economy and a stronger-than-normal seasonal softness in orders.

Analysts now don't look for any real pickup until the second half. At least one analyst, Dan Hutcheson of VLSI Research, says Applied's orders slump might be a harbinger of a dreaded double-dip recession for the chip industry. "It's looking like that," he said. "This would be the second dip after the big hit in 2001. The chip industry is volatile, and the capital equipment industry is even more volatile."

In 2001, chip gear sales fell 41% from 2000's record $47.7 billion, says the field's main trade group. That's its biggest percentage decline ever. In 2002, gear sales fell 32% to $18.9 billion, says Semiconductor Materials and Equipment International.

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