Show BUSINESS aj I II I by S 'S SPORTS INC I I ELECTRONIC SEMICONDUCTOR MARKET l FOR lOR 1978 The semiconductor branch of or the electronics Industry just finished one of 01 the most spectacular years in its history and another advance is in indicated In buoyed by new markets such as automobiles tele communications and industrial controls These business sectors plus the steadfast computer market will provide the stimuli for a good performance despite uncertainties Uncertainties un Un- certainties facing the US U.S. economy The stocks of the semiconductor companies however have performed dismally in the face of strong demand for their products In fact semiconductor ductor equities as a group are now selling at one of the lowest levels since 1974 Besides the general malaise of the stock market investors are arc disenchanted disen chanted with the low yields the lack of ofa a pickup in industrial capital spending on the horizon the continuing shakeout in consumer semiconductor products and the potential Japanese threat overhanging the industry In the opinion of the Research Department of Babson's Reports most of the problems are short The stocks of several of the well established companies are currently selling at historically low price-earnings price multiples and consequently do not reflect the strong prospects for the electronic semiconductor industry NEW PRO DUCTS TO SUSTAIN MARKET J GROWTH The semiconductor field despite the amazing growth characteristics is vulnerable to the business cycle and can be sharply affected by fluctuations in capital spending About two thirds of the industry's sales are in fact attributed attributed at at- to producers of capital goods Yet approximately 50 percent of the production goes to manufacturers of computers and allied electronic data- data processing the equipment the area which still provides much of the industry's historical growth Again we expect this to occur in 1978 And three relatively new and expanding expanding expanding ex ex- ex- ex markets autos telecommunications telecommunications telecom telecom- and industrial controls including home should appliances fuel another year of substantial im im- im provement Sparking the demand in these markets are the electronic integrated circuits semiconductor devices which have had the most over the last decade These Thes state solid-state circuits go into semiconductor memories and microprocessors to make up the chip on to drive and control the electronic devices in these new markets THE TIlE COMING JAPANESE INVASION Competition from the Japanese is proliferating and American management is watching closely the inroads being made b by the government- government backed Japanese electronics industry Both the American semiconductor and computer manufacturers realize that the Japanese could be a formidable threat in the electronic data processing and industrial-commercial industrial sectors as they already have in the consumer electronics area It should be noted however that the Japanese threat is term long and not term short since they still have not quite 2 percent of the US U.S. market in these sectors RECOMMENDATIONS The Research Department of Babson's Dabson's Bab Dab sons son's Reports is of the opinion that the best investment opportunities may be found in the broad based electronics companies rather than in the depth in-depth specialized semiconductor integrated circuits firms at this time Among issues in this field that Babson's currently favors as purchase candidates for appreciation are General Instrument Corp and Motorola both listed on the New York Stock J Exchange We follow regularly the specialized semiconductor Fairchild companies-Fairchild Camera Instrument Texas Instruments In and National ductor We maintain hold positions on the first two firms but a sell advice advice ad ad- vice on the latter Up-to-date Up reports are available on General Instrument Corporation and Motorola and these may be obtained free of charge by writing to Babson's Reports Inc Wellesley Hills Massachusetts |