Business Picking Up For TI’s Phone Chips

Texas Instruments Inc., the world’s dominant chip supplier for wireless phones, said Tuesday that orders from phone makers are starting to pick up, signaling the initial signs of a rebound in demand for mobile handsets.

The company still believes sales for this year will be flat compared with last year’s record of 400 million phones, an estimate in line with the sharply reduced forecasts from major phone makers Nokia and others. Before the telecommunications and technology sectors hit the skids, phone manufacturers had expected worldwide sales of about 500 million handsets.

In a news conference in Taipei, TI Chief Operating Officer Richard Templeton said the retail cell phone market remains sluggish for now. But he sparked a glimmer of optimism by noting that Nokia and others are beginning to place orders for phone chips again.

“The inventories have been caught up, we see resumed ordering demand from some of our customers, because they’ve got an ability to ship more product into the marketplace,” Templeton said.

If investors saw the signs of a turnaround in Templeton’s remarks, it didn’t show up in the stock market. TI shares fell 29 cents to $35.71 amid another broad sell-off in tech shares Tuesday. Among wireless phone makers, Nokia fell 55 cents to $16.80 and Motorola fell 17 cents to $18.65.

An uptick in the wireless phone market is unlikely to trigger similar gains in demand for network equipment, analysts noted. Nortel Networks, Lucent Technologies, Cisco Systems and others in data and phone network equipment have been devastated by an abrupt reversal in orders, and so far there has been no sign of increased spending by phone-company customers.

In wireless, though, subscribership is still growing, and many carriers still are spending money to expand and upgrade their networks. Analysts say the expected phone sales won’t develop this year because of a general economic slowdown and a decision by European carriers to de-emphasize prepaid wireless sales, which traditionally has been a big driver for phone sales.

If TI is right, then 2001 may turn out to be a mere pause in the steady growth in phone sales over the last five years.

“We’re all looking for these little tidbits of positive indicators that the market is turning around,” said Keith Mallinson, a wireless consultant at the Yankee Group. “I think [what Texas Instruments said] is significant, and it should be taken very seriously because their demand is probably not a bad proxy for the overall demand for the entire handset market.”

Mallinson added that many of the factors that led to the slowdown in phone sales “have flushed themselves through the market.”

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Bloomberg News was used in compiling this report.