A bad day for U.S. chip makers

Even though a key indicator of semiconductor sales showed a sales increase, it was a discouraging day for the U.S. semiconductor industry because of continuing pricing pressures
and stalled trade negotiations.

Talks between government and industry groups continue in efforts to renew the 10-year-old U.S.-Japan semiconductor agreement, but little progress has been made despite a deadline that is only three weeks away.

U.S. companies want to renew an agreement that has given foreign businesses more than 30 percent of the Japanese chip market, a pact that expires July 31. Japan disagrees, arguing that the goals of the agreement have been met, and has proposed the formation of a multinational forum that would include the European Union to
promote international cooperation but set no market quotas.

The United States, however, has set its sights on a new "transitional" agreement that would require the Tokyo government to track market share, although it has not suggested setting further quotas.

Senior trade representatives from both countries will meet at the Asian Pacific Economic Cooperation summit in New Zealand next week, while U.S. Semiconductor Industry Association president Pat Weber met with Japanese industry executives today in Tokyo,
according to Bloomberg news service.

Meanwhile, the U.S. chip industry's book-to-bill ratio, a key measurement of sales, rose from .83 in May
to .91 in June, but remains under the 1.0 watermark that indicates an equal amount of sales and orders.

Such a rise usually means that demand is increasing, but in this
case analysts attribute the change to a slackening of sales,
according to Bloomberg. New orders did rise from $3.09 billion to $3.11
billion but are down 28 percent from last June. Overall shipments are
down 7.2 percent from a year ago.

And, as companies struggle to move inventory, the price of 4-megabit
memory chips has fallen from $15 to under $3 in less than a year.

Motorola was forced to acknowledge today
that it is feeling the crunch as the company's
second-quarter earnings dropped 32 percent from the year previous to $0.54
cents a share. Analysts were expecting per-share earnings of 69
cents, according to Reuters news service.

The company said today in a conference call
that it expects revenue among chip makers to fall 10 percent this year. Almost every major chip manufacturer predicts
losses in the coming quarter, except Intel, which is expected to
announce next week a 10 percent jump in second-quarter earnings.

Last month, Micron
Technology reported earnings of $58.2 million in the previous quarter,
a sharp decline from $220.2 million a year earlier.