SAN FRANCISCO -- Anyone looking for a sign on the course of semiconductor stocks should keep an eye out for the upcoming IPO of

ON Semiconductor

. A maker of so-called single-function chips found in a wide range of devices, ON Semi was spun off from

Motorola

(MOT)

in August by leveraged buyout firm

Texas Pacific Group

.

Because chips are tirelessly cyclical, ON Semi's market reception will tell a lot about where investors think the sector currently sits. The stronger the IPO, the greater the public's enthusiasm that the currently bullish cycle still has vigor.

First, though, the market might need to calm down. Like most tech issues Tuesday, chip stocks had a wild ride. Shares of communications chipmaker

Broadcom

(BRCM)

had a 68-point swing, for instance. An environment like that could scare investors away from an IPO. But consider that while most tech stocks fell Tuesday,

Fairchild Semiconductor

(FCS)

, which makes products similar to those of ON Semiconductor, rose 5%.

ON Semi will ship about 18 billion chips this year, covering 16,000 products. Its chips manage battery power, control on and off switches in appliances, regulate voltage and can be found in devices ranging from a washing machine to a dashboard clock. For technology, this is dull stuff.

"We are the

Home Depot

(HD) - Get Report

of the semiconductor component market," says ON Semi CEO Steve Hanson, who spoke to

TheStreet.com

before his company filed its registration statement with the

Securities and Exchange Commission

Feb. 18. Motorola sold the division to Texas Pacific in August because its 600-person sales force was being suffocated in a company with more than $30 billion in annual revenue.

Motorola's sales force had trouble pushing the division's immense product line of inexpensive parts at the same time they were trying to sell high-end communications chips for top dollar. The two just didn't fit together. Some of ON Semi's parts were first developed 25 years ago and still sell. "It's like the nail," Hanson says. "We needed them in 1965, and we still needed them in 1995."

What makes the ON Semi IPO interesting is that component makers are highly prone to the cyclicality of the semiconductor market. In the chip industry, demand almost always rises. But prices typically fall when supplies are plentiful, a condition that occurs about every three to five years once companies build too many fabrication plants. Savvy chip investors try to time the cycle. And a rousing reception to an IPO of a company like ON Semi, of the

Basic Brown Bear variety, is a strong measure that investors feel the chip cycle still has a way to go.

"It's a good barometer of the general attitude," says longtime semiconductor analyst Drew Peck of

S.G. Cowen

, which is not an underwriter of the ON Semi IPO. "These companies that have relatively broad-based product lines are the epitome of the cycle. They will thrive in a strong economy and suffer in a weak economy."

When Fairchild Semiconductor, which similarly makes zillions of these inexpensive components,

went public in early August with 20 million shares, the stock closed the first day at 18 3/4, just 1/4 above the offering price. That was a rousing success, considering the size of the offering, and considering that other IPOs that week were a bust:

1-800-Flowers.com

(FLWS) - Get Report

,

Quotesmith.com

(QUOT) - Get Report

and

Splitrock Services

(SPLT)

closed below their opening prices.

Fairchild's Ascent
The stock's doing well, even when compared with the highflying SOX.

"Investors were hungry for good, solid companies serving a broad market and that had phenomenal management," says Tim Mahon, chip analyst for

Credit Suisse First Boston

, which underwrote the Fairchild IPO. His firm is not involved in the ON Semi IPO.

That was eight months ago, when all signs seemed to show that the chip industry was at the beginning of a

boom cycle. But the

Philadelphia Semiconductor Index

has risen 140% since -- even after an 11% drop over the past 15 days. Now investors are starting to feel

nervous that even with profits pouring into most chip companies, these stocks may be overvalued relative to future growth prospects.

"ON Semi is coming out a year later," Mahon says. "We are further out in the cycle."

Still, his feelers in the market tell him ON Semi will garner a higher valuation than the $375 million Fairchild raised. "Right now, people are feeling good about the cycle," he says.

Investors went wild over the most recent chip IPO, memory chipmaker

Infineon Technologies

(IFX)

. Its American depositary receipts rose 107% to close at 70 March 13, although the shares have since fallen 18%. And investors enthusiastically grabbed shares of

Quantum Effect Devices

(QEDI)

, a maker of high-speed chips for communications equipment, on Feb. 1. The 3 million shares that went

public soared 187% above the offering price.

S.G. Cowen's Peck cautions, though, that the appetite for semiconductor stocks may be more fickle. A wider range of investors is now attracted to semiconductor stocks, he says, and these buyers may be more willing to believe in a new economy that negates the industry's historical patterns. Because of the influx of these investors in recent years, the industry may be more prone to the changes in the overall world economy than to chip supply issues. And that means a less predictable investment market.

"The attitude of investors seems to change on a daily basis," he says. "It's not driven by fundamentals." If that's true, it leaves more to chance when ON Semi debuts.