Although Intel Corp.'s flawed Pentium chip generated unflattering publicity for the semiconductor industry recently, chip producers are likely to produce positive headlines when they report fourth-quarter earnings.
Strong demand for and sales of personal computers in the final three months of 1994 helped fuel demand for semiconductors - the tiny microprocessing chips used to run computers.In a preliminary report, the Semiconductor Industry Association said the $3.21 billion in orders in the fourth quarter were up 38.9 percent from the same period in 1993. Shipments were up 38.3 percent to $3.06 billion.
Chip demand was strong despite intense focus on the industry in the wake of the Intel chip flap.
In late November, it was revealed that a flaw in Intel's Pentium chip caused errors in some complex division problems. Intel was soundly criticized for initially offering to replace the chips only for customers who could prove they needed such sophisticated capabilities. On Dec. 20, the Santa Clara, Calif., company bowed to pressure and decided to replace the chip for any customer who requested it.
Most analysts say the controversy before Christmas reduced industry sales. But the damage is difficult to measure, especially because sales were so strong.
"Fourth-quarter expectations were very high. By and large they were met and possibly exceeded," said Cowen & Co. analyst Drew Peck.
Peck said demand for personal computers was driven "extraordinarily high" by consumers during the holiday shopping season, rather than by businesses.
Analyst Krishna Shankar of Donaldson Lufkin & Jenrette, however, expects the momentum in the semiconductor industry to continue into 1995.