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Motorola sees chips with everything

Cars, TVs and wireless devices will be backbone of new chip goldmine

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Motorola expects the semiconductor industry to grow by 19 per cent in 2000, prompted by demand for chips in cars, televisions and wireless devices.

The company forecast that its own semiconductor segment would hit double-digit profit by the end of next year – one year ahead of schedule. Motorola is to develop four main areas of the sector: wireless communications, networking and computing, the automotive industry, and digital consumer products, Reuters reported.

The vendor forecast a sales surge in all four areas, with a 30 per cent annual growth rate in chips for wireless communications over the next five years, and 20 per cent growth for networking chips. This follows the company's major restructure in 1998, where it shed thousands of staff as its chip unit recorded a pre-tax loss of $1.22bn for the year. It was back in the black in 1999, as the industry recovered thanks to demand for devices such as smart phones.

On Friday, Hector Ruiz, executive in charge of semiconductor products, said the industry had turned the corner and was on an upward spiral. "After three miserable years, 1999 appears to be the beginning," he said. US analysts were also positive about the company's direction.

Motorola plans to cut costs by outsourcing more of its chip production and downscale plans for new plants, according to Brian Modoff, an analyst with Deutsche Bank. "The combination of these two efforts should reduce the company's depreciation expense while lowering cash consumption requirements and should have a positive impact on semiconductor operating margins," he said. ®

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