CyberOptics shares plunge 23% as chip-industry slump pounds its sales

Shares in CyberOptics Corp. fell 23% Wednesday after it warned investors that sales were slumping amid a worldwide slowdown in the semiconductor industry.

Executives at the Golden Valley-based maker of semiconductor test equipment said sales for the just-finished second quarter came in at the low end of a previously announced range. They also forecast sales for the third quarter would likely be about 19% to 27% lower than they were in the same period of 2018.

"It's really due to uncertainty around trade and the tough semiconductor market," Jeffrey Bertelsen, the company's chief financial officer, said. "The whole global semiconductor industry and surface mount technology market is soft right now."

CyberOptics shares fell $4.18 to $13.71, the lowest closing price since early 2016.

That year, the introduction of new products and an upturn in the broader semiconductor industry resulted in a tripling in the value of CyberOptics shares. They reached an all-time high of $36 in early 2017.

But now, the semiconductor business is in the accelerating portion of a downward phase in its price and revenue cycle. In the first three months of the year, chip-industry sales fell 15.5% compared to the last three months of 2018, according to the World Semiconductor Trade Statistics organization.

Sales normally decline around 2% or so in the first quarter compared to the fourth, when manufacturers are making final deliveries for products sold during the holidays. But the drop this year marked the start of a new downward phase in the pricing cycle and marked the fourth-biggest sequential quarter decline in the last 35 years.

In Tuesday's announcement, the company said sales for the quarter ended June 30 were between $15 million and $15.2 million, the low end of a previously forecast range of $15 million to $16.5 million.

For the July-through-September quarter that just started, executives forecast sales of $12 million to $13.5 million. That's down from $16.7 million in the third quarter of 2018.

The chip industry's current pricing downturn is most pronounced in memory chips, both DRAM used for temporary storage and NAND flash for long-term storage. The largest U.S. maker of memory chips, Micron Technology Inc., last week reported a 39% revenue drop for the three months ended May 30.

Semiconductor price and revenue cycles are shaped by customer demand as well as the time it takes to build new factories. In simplest form, as chip demand rises, manufacturers build new factories, a process that takes 12 to 18 months. During that time, prices tend to rise until new plants come on and begin to saturate the market with supply, which leads to a turning point when prices fall and the cycle repeats.

CyberOptics said it expects chip industry conditions to be "sluggish" through the rest of the year, then strengthen early next year.