Semis Hammered After Microchip Technology (MCHP) Warns on Q2

The Semiconductor sector was hit with heavy selling pressure at the open Friday. The fall is tied to Microchip Technology's (NASDAQ: MCHP) warning yesterday after the close. Illustrating the carnage in the sector, ETF Market Vectors Semiconductor ETF (NYSE: SMH) is down 6%.

Here's what Microchip Technology said:

“The September quarter is usually a back-end weighted quarter because of a traditional weak August due to holidays in various parts of the world. The month of September is usually a strong month for our revenue after the summer holiday period. This time, the September sales did not materialize to our expectations. The revenue miss was led by China where the September quarter is traditionally the strongest. This time, sales in China, excluding ISSC, are expected to be down sequentially,” said Steve Sanghi, Microchip’s President and CEO.

Mr. Sanghi added, “Microchip often sees the turn of the industry ahead of others in the semiconductor industry. First, in contrast to many others in the industry, we report sales from distribution on a sell-through basis worldwide. We built a significant amount of inventory in the distribution channel in the September quarter. If, like many others in the industry, we recognized sales on a sell-in basis to our distributors, our sales would have been significantly higher for the September quarter. Second, Microchip does business with over 80,000 customers worldwide, most of whom are small and nimble and are able to adjust their demand in real time. We believe that another industry correction has begun and that this correction will be seen more broadly across the industry in the near future.”

Stocks being effected include:

• Micron Technology (NASDAQ: MU)
• Intel (NASDAQ: INTC)
• Texas Instruments (NASDAQ: TXN)
• QUALCOMM Inc. (NASDAQ: QCOM)
• Applied Materials (NASDAQ: AMAT)
• Broadcom (NASDAQ: BRCM)
• SanDisk Corporation (NASDAQ: SNDK)
• NXP Semiconductors (NASDAQ: NXPI)
• Analog Devices (NASDAQ: ADI)
• Power Integrations, Inc. (NASDAQ: POWI)
• ON Semiconductor (NASDAQ: ONNN)
• FREESCALE SEMICONDUCTOR, LTD., (NYSE: FSL)
• Atmel Corp (NASDAQ: ATML)
• Maxim Integrated Products (NASDAQ: MXIM)

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