Chip stocks down on possible Chinese downturn

The chip sector fell Friday, hurt in part by a possible post-earthquake downturn in China.

The chip sector, as measured by the Philadelphia Semiconductor Index, fell 4.25 points or 1 percent to 415.47 in midday trading.

Lazard Capital Markets analyst Daniel Amir said the impact from the Sichuan earthquake in China this week could be worse than expected. Some of the world's largest chip manufacturing facilities are located in the province.

Amir said management of various chip companies told him that, while the earthquake has had little effect on facilities, it could hurt Chinese consumer spending more than heavy snowstorms in February.

Amir noted that Sichuan province is fairly populous and has seen significant growth in recent years. Also, Chinese consumer sentiment could become more cautious because of the earthquake.

He also said Skyworth, China's largest TV manufacturer, is exploring the possibility of shifting away from TV chip maker Trident Microsystems Inc., according to his sources, which could be good news for Sunnyvale, Calif.-based competitor Zoran Corp.

Shares in Santa Clara, Calif.-based Trident fell 10 cents or 2.1 percent to $4.62 in afternoon trading. Zoran fell 14 cents to $14.

Communications chip maker Broadcom Corp. was one of the few gainers. Amir said the company is gaining market share in the Chinese set-top box TV market.

"The domestic market for set top boxes remains very strong, with the continued shift to digital TV and the increasing subscriber growth as major factors," he said.

Shares of Irvine, Calif. Broadcom rose 63 cents to $28.21 in afternoon trading.

Exar Corp., which makes chips for other semiconductor companies, plunged on disappointing fourth-quarter earnings and first-quarter forecast.

Oppenheimer & Co. analyst Rick Schafer said a change in the company's accounting system confused investors. He described the company's results as "light" and maintained his "Underperform" rating. Shares in Fremont, Calif.-based Exar fell $1.16 or 12.9 percent to $7.85 in afternoon trading. They have traded between $6.50 and $15.24 in the last year.