Chip Stocks Tumble As Analysts Cut Intel '02 Earnings Targets; Fairchild Slashes Q3 Views; But a chip industry group reports year-over-year sales for July increased by 8%.(INTERNET & TECHNOLOGY)

Byline: JAMES DETAR

Semiconductor companies continue to warn that things aren't improving. Tuesday's 3.88% drop in the tech-heavy Nasdaq stock market was fueled, analysts say, by a fresh spate of poor outlook reports and other bad news.

Analog chipmaker Fairchild Semiconductor warned that third-quarter results will likely be lower than earlier predicted. Several analysts issued reports saying they expect Intel Corp. to lower its guidance for the quarter. Intel will issue its mid-quarter update Thursday. The world's biggest chip seller is considered a bellwether for the industry.

In contrast to the poor market news, the Semiconductor Industry Association said Tuesday chip sales were up a surprising 8% to $11.4 billion in July. That's the first year-over-year increase in 17 months.

It's the same story that industry observers have told for most of this year. The chip industry apparently has hit bottom. But it's anybody's guess when chip companies will show some real growth in sales.

Analysts say the July growth figure was misleading. It's easy to show growth from a deep hole. And chip sales a year ago, in July 2001, came in the midst of the industry's worst downturn ever. Sales fell a record 32% in 2001 from the prior year.

"The SIA data wasn't a surprise," said Bank of America Securities analyst Douglas Lee in San Francisco. "It compared July 2002 to July 2001, which was a horrendous month. Monthly comparisons are going to be a lot easier from here on out," he predicted.