New York, July 5 (Bloomberg) -- Texas Instruments Inc., Advanced Micro Devices Inc. and National Semiconductor Corp. fell after Salomon Smith Barney Inc. analyst Jonathan Joseph said semiconductor shipments will slow and prices will decline.
Texas Instruments dropped 5 1/8 to 63 7/8 and Advanced Micro tumbled 9 9/16 to 74 1/2 on the New York Stock Exchange. Silicon Storage Technology Inc. slid 15 1/16 to 83 15/16. Joseph said inventories are rising and cut his ratings on the stocks. Intel Corp., the world's biggest chipmaker, fell 5 1/4 to 131 5/8.
Chipmakers' shares had risen 35 percent this year before today, making the Standard & Poor's Electronics Semiconductors group the fourth-best performer in the S&P 500 Index. Joseph said sales growth forecasts for cell phones have fallen in the past month and the chips that power them are cheaper and more plentiful after months of shortages.
``This is the first time we've heard anything negative about semiconductors in 18 months,'' J.P. Morgan Securities analyst Terry Ragsdale said.
Intel is the best-performing member of the Dow Jones Industrial Average this year, rising 60 percent. Advanced Micro is No. 2 in the Standard & Poor's 500 Index after more than doubling in 2000.
Joseph lowered his recommendation on Advanced Micro, National Semi and Texas Instruments to ``outperform'' from ``buy'' and reduced Silicon Storage to ``neutral'' from ``buy.''
National Semi shares fell 8 3/16 to 49 15/16. Applied Materials Inc., the No. 1 supplier of chipmaking equipment, dropped 9 1/8 to 83 7/16. Micron Technology Inc., the biggest U.S. maker of computer-memory chips, fell 7 5/16 to 83. TelCom Semiconductor Inc., which builds digital-to-analog converters and chips, dropped 9 1/2 to 31 3/4.
Boom and Bust
Chip and semiconductor-equipment makers historically have operated in a boom-and-bust cycle of supply and demand. Two years ago, chip-equipment companies were struggling as semiconductor makers spent less on new tools because of an abundant chip supply.
Since then, shortages of components including flash memory and tantalum capacitors used in cell phones had led to price increases for the tiny devices.
Now, manufacturers are beginning to increase capacity and prices are starting to fall, Joseph said. Spot prices for some tantalum capacitors, which regulate electricity in a circuit, have fallen to 65 cents each from $1.00.
``The sector is likely to see peak capital spending growth rates this year, which has closely correlated with cyclical shipment peaks in the past,'' Joseph wrote. He said the slowdown may take six to nine months to roll through the chip industry.
Other analysts said it's too early to predict a slump.
``All of us are trying to figure out when the end of the cycle is coming,'' Ragsdale said. ``When it comes, it's going to be a train wreck. But it seems very early to me.''
Most analysts said supply will be tight for the foreseeable future and that smaller chipmakers will feel any crunch first.
``I am still hearing stories of extreme desperation,'' said SG Cowen's Rick Billy. ``I am hearing about people who can't get any tantalum capacitors and are having to shut down production lines.''