Magazine

U.S.: Without Chips, the Economy Is Tougher to Read


On Apr. 24, the Commerce Dept.'s Census Bureau released its closely watched report on durable-goods orders, but economists were surprised to find out the data no longer included semiconductors--and would not for the foreseeable future. The bureau explained that too many large chipmakers had refused to participate in the voluntary survey and, as a result, it could no longer produce reliable estimates of semiconductor activity.

Why have chipmakers turned off the info spigot? The problem has been brewing for a while, but Intel Corp. (INTC) seems to have tipped the balance. Intel and others believe the bookings data do not accurately reflect the state of their businesses, partly because they don't account for cancellations and double ordering. "We decided that we'd stop providing that information which we think is irrelevant and potentially misleading," says Intel spokesman Chuck Mulloy. William M. Jewell, Americas vice-chairman of World Semiconductor Trade Statistics, says companies opposed to reporting worry the very volatile data have the potential to negatively hit their stock prices.

The Census Bureau says it is willing to work with chipmakers to make reporting easy and to persuade companies that it is in their best interest to report the information. It's important that chipmakers change their mind. Although semiconductors accounted for only 3.4% of durable-goods orders last year, demand for semiconductors is seen as a leading indicator for where all technology industries are headed.

The lack of chip data also creates a greater risk of misreading the economy. Recent orders for durable goods, including business equipment, look much weaker when semiconductors are excluded (chart). A wrong signal on capital spending could mask the economy's true strength, leading to bad investment and policy decisions.

The bureau says there are no other industries where this problem is looming. But the absence of chipmakers' data leaves a hole in a crucial part of the New Economy. By James C. Cooper & Kathleen Madigan


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