George Scalise Third Quotations

There is some evidence of inventory accumulation of semiconductors and finished electronic products during the first quarter of 2006. We expect the electronic industry supply chain will respond quickly as it did late in 2004 and that inventories will be in balance by the third quarter.

The July data, and the year-on-year increase, confirm that a moderate but sustainable recovery continues, putting us on track for 7-9 percent sequential growth in the third quarter,

Our forecast released in November calls fourth-quarter sales to be 4.7 percent higher than the third quarter, and with two months of data now in, we are on target to meet that projection.

The industry is currently experiencing lower sales due to an inventory overhang and deceleration in the end-equipment markets. Current forecasts suggest the inventory adjustment will be completed by the end of the third quarter, and end-market product demand will improve later in the year.

U.S. semiconductor companies have over 70 percent of their manufacturing capacity in the United States, while less than a third of our markets are here.