Semiconductor Capital Equipment Stocks Discussion

Top 231. Jan 21, 2000 10:09 AM

» Kirk - Top SSB Picks TER & LRCX

Lam Research (1H, Top Pick) and Teradyne (1H) are our top two picks.

Another SSB's comment on BTB number. Very bullish on LRCX..

Dec. total equipment book-to-bill was 1.18, up from Nov.'s 1.10. Total bookings up 8% with shipments up a slight 1%.

Front-end b-to-b increases slightly to 1.15 from 1.12 (Nov.). Orders up 5%, shipments up 3%.

Back-end b-to-b increases sharply to 1.25 from 1.05 (Nov.). Orders up an impressive 15%, shipments down 4%.

Lam Research (1H, Top Pick) and Teradyne (1H) are our top two picks.

--OPINION:------------------------------------------------------------------
Solid Bookings Growth Inline With Strong Equipment Earnings Reports

Inline with the upside earnings announcements of the equipment companies for the December quarter, overall equipment bookings rose by a healthy 8% in December, versus our estimate of 8%-10% sequential growth. While we had expected similar strength from both the front-end and back-end equipment companies, the back-end was disproportionately stronger with bookings growth of 15% versus the front-end growth of 5%. However, shipments grew at a much slower pace than what we had expected with an overall 1% sequential growth versus our expectations of 5%-7% growth. Back-end shipments actually declined by 4% with front-end shipments growing 3%. We find the shipments decline difficult to understand in the context of the 20%-30% sequential revenue growth posted by most equipment companies, and we believe that it could be revised up over the next few months. This slow increase in shipments resulted in a higher than expected total book-to-bill of 1.18 versus the expected 1.13 - 1.15 range. Front-end book-to-bill of 1.15 was in the low end of our 1.15 - 1.18 range with the back-end book-to-bill of 1.25 well above our estimate of 1.08.

Total Book-To-Bill Rises To 1.18 From 1.10

SEMI's December book-to-bill rose sharply to 1.18 from 1.10 in November as bookings grew as expected while shipments grew at a more modest rate. Total U.S. equipment bookings rose 8% to $1,833 million after a 6% growth in November. Shipments, however, only grew 1% sequentially to $1,558 million after 4% growth in the previous month. The slower than expected rise in shipments led to a total book-to-bill which was in the high end of our expected range.

Front-End Book-To-Bill Rises Slightly To 1.15 From 1.12

The front-end book-to-bill fell in the low end of the expected range at 1.15, up from 1.12 in November. Bookings increased 5% to $1,309 million after a similar 5% increase in the previous month. After strong December quarter commentary from the front-end equipment manufacturers we had expected stronger growth, but an even slower ramp in sales led to the uptick in the book-to-bill. Sales grew 3% sequentially to $1,140 million after growing 4% in November.

Stong Growth In The Back-End To 1.25 From 1.05

As in November, the biggest upside came in the back-end with the book-to-bill rising sharply to 1.25 from 1.05 in the previous month. Bookings rose by an impressive 15% to $524 million versus a 9% rise in November. The spike in the back-end book-to-bill was compounded by the 4% sequential decline in back-end shipments to $418 million. Shipments rose 4% in the previous month.

Year-Over-Year Comparisons Are Still Strong

Year-over-year shipments and bookings patterns are still very impressive as the industry continues to grow at a rapid pace. Total bookings are up 107% from December-98 after a 122% year-over-year improvement in November, with shipments up 69% versus a similar 69% rise in the previous month. Front-end bookings are up 93% (104% in November) with shipments up 67% (61% in November). The most impressive year-over-year comparisons are still evident in the back-end, with a 154% rise in bookings (190% in November) and 77% increase in shipments (91% in November).

Total 1999 Bookings And Shipments Well Above 1998 Levels

1999 was an extremely positive year for the equipment industry and was a sharp contrast from the terrible downturn of 1998. As such, total, front-end, and back-end bookings and shipments for 1999 were well above the depressed levels of the previous year. Total bookings for 1999 rose 60% to $17.5 billion, front-end bookings also rose 60% to $12.9 billion, and back-end bookings rose an impressive 64% to $4.6 billion from 1998. Shipments, however, rose by a more modest rate as equipment companies started to build more backlog. Total shipments rose 9% to $15.1 billion, front-end shipments rose 11% to $11.2 billion, and back-end shipments rose 2% to $3.8 billion.

Orders Surpass The 1997 Cycle Peak For Both The Front And Back-End

This is the first month in which both the front and back-end surpassed the peak bookings level achieved during the 1997 upturn. December's total bookings of $1,833 million are now a healthy 12% above the November 1997 bookings of $1,633 million, with front-end bookings of $1,309 million also 12% above the November 1997 peak of $1,170 million. Similarly, back-end bookings of $524 million are a full 13% above the 1997 cycle peak of $463 million. We should see continued growth in bookings as the current upturn has additional drivers (communications/networking/consumer) versus the 1997 cycle, which was predominantly PC driven.

Shipments Still Below Cycle Peak As Industry Builds Backlog

As the industry is more keen on building more backlog as compared to the previous cycle, it is only the back-end which surpasses the 1997 peak levels in shipments. Back-end shipments of $418 million are 4% above the peak level of $401 million in December 1997. However, total and front-end shipments are still off the November 1997 levels, illustrating the industry's urge to build backlog. Total shipments are still 5% off the peak of $1,634 million and front-end shipments are 8% below the peak of $1,240. In addition, for the first time in recent memory, the previous months' bookings and shipments data were not revised (less than 1%), resulting in more meaningful sequential comparisons.

Top Two Picks Are Lam Research And Teradyne

Our top two picks are Lam Research and Teradyne. We rate Lam Research 1H (Buy, High Risk) with a price target of $191, or 35 times our calendar 2001 EPS estimate of $5.46, and Teradyne 1H (Buy, High Risk) with a price target of $98, or 40 times our 2001 EPS estimate of $2.45.

-- posted by Kirk

Top 232. Jan 21, 2000 10:21 AM

» matttheduck - in the chart above

shipments are up 13 percent in 5 months
bookings are up almost 20 percent in 5 months

great growth pace

-- posted by matttheduck

Top 233. Jan 21, 2000 1:48 PM

» Bill_Tippett - Semi-equip BTB Breakdowns

Thanks for posting that info Kirk...I've been looking for it ever since the overall numbers were released. Is this generally available or do you have to be a SSB customer to get it? I posted a couple of references to this site on Silicon Investor so maybe that will steer some customers your way!

Thanks again!

Bill

-- posted by Bill_Tippett

Top 234. Jan 22, 2000 7:46 AM

» Kirk - Bill

Thanks Bill!

You just have to keep comming back for more good information. My sources are my secret! 8)

You will find that many of us try to adopt threads and then post information related to them that we get from many sources.

Our stock symbol BOWG stands for "Best of Web Guide" for good reason.

I always encourage others to help if they find a good article and feel like sharing to pay back for what they read here. This site gets better with more people helping. Don't send me an email saying "thanks" but instead express it by finding a good article and posting it here. That is all the thanks I require! 8)

You should see our Biotechnology discussion threads where I know zippo and others are doing a great job gathering information.

-- posted by Kirk

Top 235. Jan 22, 2000 7:49 AM

» Kirk - Goldman's Gunnar Miller on Semiconductor Industry:

Goldman's Gunnar Miller on Semiconductor Industry: Comment

New York, Jan. 21 (Bloomberg) -- Gunnar Miller, an analyst at Goldman Sachs & Co., spoke about the semiconductor industry on financial news network CNBC. Some stocks Miller said his company recommends include Lam Research Corp. and MKS Instruments Inc.

``What we've really seen is a recovery from a period of underspending in 1998. Late 1998 was the absolute trough, and 1999 began a recovery in the industry.'

``Undercapacity in the industry is really resulting in rather strong orders for most of the U.S.-based semiconductor-equipment companies as semiconductor companies ramp up their production to meet demand.'

``We've studied past cycles repeatedly and it looks as though most up cycles tend to last for two to three years. If you view this with a baseball analogy, we are probably into the third or fourth inning of the current up cycle.'

``One thing that we are always aware of is that the semiconductor-equipment business and semiconductor capital spending is likely to remain very cyclical. However, all of our indicators still seem to point toward continued group undercapacity for at least the remainder of the year 2000.'

``I think what investors have to realize about semiconductor- equipment stocks, is that this is the business of selling hundreds of units with million-dollar price tags, as opposed to selling millions of units of something for tens or hundreds of dollars like the (personal computer) microprocessor business.'

``These companies can report big bottom-line surprises on relatively modest upside surprises. We think that trend can continue for at least the next several quarters.'

-- posted by Kirk

Top 236. Jan 22, 2000 10:32 AM

» PeteM - A pity that many people sold out of UTEK just as they were about

A pity that many people sold out of UTEK just as they were about to start reporting positive earnings. Knock on wood.

-- posted by PeteM

Smaller Chip Firms Seen as Value Plays

Top 237. Jan 22, 2000 5:27 PM

» JenL_2 - Smaller Chip Stocks = Value Plays?

This from 1/21 CNBC.com:

(some excerpts)

Analysts say their optimism about stocks in this sector is based upon almost unprecedented strong demand in their core markets.

The worldwide wafer fabrication equipment market is expected to generate revenue of $25 billion in 2000, an increase of 43.5 percent over last year, according to a recent report by Dataquest, based in San Jose, Calif.

"The return to a relative balance of capacity and demand and stable pricing will bring two to three additional years of strong expansion," says Clark Fuhs, an analyst at Dataquest.

"Over the next 12 months there certainly are some good opportunities," agrees Mike O’Brien, an analyst at SoundView Technology Group, based in San Francisco. "Business is great and getting better and it could go on until 2003."

"I’ve been following these stocks for 30 years," Murphy adds. "And I’ve never seen a time when you could project growth like this."

Murphy says the upturn is linked to several advances in the chip-manufacturing process, including the movement from 0.25 to 0.18 chip geometries, the switch from aluminum to copper-based chips, and the introduction of larger 12-inch silicon wafers, all of which require new manufacturing equipment. "It’s going to be a four-year run," he says.

Jay Deahna, an analyst at Morgan Stanley Dean Witter, based in New York, also likes the sector, but with a much shorter-term horizon. Deahna says investors would be wise to get into the semiconductor manufacturing equipment maker stocks at their current levels, even the big firms, but he adds they should keep their powder dry.

"They should outperform the market for the first half of this year," Deahna says. "But investors should be ready to take profits toward the middle of the year. They’ll probably underperform in the second half," he warns.

.....Jen

-- posted by JenL_2

Top 238. Jan 23, 2000 8:56 AM

» Bill_Tippett - When to sell?

More food for thought (thinking out loud):

Stock: PSR (per SI):

Top Tier Group (made most of their move?):

AMAT 11.48
KLAC 11.46
LRCX 7.46
NVLS 10.40
TER 7.22

Second Tier Group (making their move?):

BRKS 5.69
COHU 5.80
CYMI 9.40 (belongs in Top Tier now?)
MTSN 6.21

Third Tier Group (yet to make their move?):

CFMT 2.86
CRPB 1.49
PLAB 3.62
SFAM 2.36
SMTL 2.93
SVGI 1.72
UTEK 2.97

I am not in the Top Tier at all (except for 3K shares of NVLS in a taxable account which I will hold for another year), heavily in the Second Tier group, and moderately in some of the Third Tier group. I got out of the Top Tier when they were about 50% of where they are now in favor of the Second Tier, which has been a good decision from a total return standpoint. Maybe now is the time to move from Second Tier more into the Third Tier, but I have a habit of making these moves too soon!

Anyone is welcome to ring the bell for me when these stocks are at their top!

-- posted by Bill_Tippett

Top 239. Jan 25, 2000 1:43 PM

» Kirk - Another $2B to the pot

Intel to Build Its First High Volume 300 MM Production Wafer Fab in Arizona; 133,000 Square Feet of Cleanroom to Result in $2 Billion Investment

Business Editors and High-Tech Writers
http://www.businesswire.com/webbox/bw.01...

SANTA CLARA, Calif.--(BUSINESS WIRE)--Jan. 25, 2000--Intel Corporation today announced it will build its first high-volume production manufacturing facility for 300 millimeter wafers, in Chandler, Ariz. The company said it will invest $2.0 billion to build and equip the wafer fabrication facility. The project is contingent upon local governmental approval, expected in the next few weeks.

"This facility will help us maintain our leadership in the extremely competitive world of semiconductors. Fab 22 will give us more manufacturing capacity in order to help us better address our customers' growing need for high performance microprocessors," said Mike Splinter, Intel senior vice president and general manager of the Technology and Manufacturing Group.

The 300 mm (12-inch) wafer offers 225 percent of the silicon surface area (over twice as much surface area), and about 240 percent of the printed die (individual computer chips) per wafer, relative to standard 200 mm (8-inch) wafers used in many semiconductor manufacturing plants today. In addition, the larger wafers will reduce manufacturing costs per wafer by more than 30 percent.

Splinter continued, "Intel plans to bring this fab on line in record time to meet our customers' needs. It will initially begin production using Intel's 0.13-micron process technology with copper metallization on 200 mm wafers in 2001 and transition into the production of 300 mm wafers." A micron is approximately 1/100th the width of a typical human hair.

The construction of the new facility will create an estimated 1,000 new jobs over the next five to eight years. These jobs include technicians, engineers and support personnel. There are currently 8,150 Intel employees in Chandler.

The new fab will be located on Intel's 705 acre Ocotillo campus in Chandler, near Intel's existing Fab 12. Intel broke ground on Fab 12 in 1994 and was producing computer chips by the summer of 1996. The new fab will have approximately 360,000 square feet, 133,000 of which will be cleanroom. Additional buildings will be constructed adjacent to Fab 22 and will include a four-story, 320,000 square foot manufacturing support building, a 123,000 square foot central utility building and several expansions to existing buildings and a warehouse.

In addition to today's announcement, Intel is also continuing to evaluate other sites for additional manufacturing capacity, including its site in New Mexico.

Intel, the world's largest chip maker, is also a leading manufacturer of computer, networking and communications products. Additional information is available at www.intel.com/pressroom.

"online in record time to meet customer needs"

Music to my ears!

-- posted by Kirk