Semiconductor Capital Equipment Stocks Discussion
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» Kirk - To: +Carl Mays (2802 ) From: +Tom Murphy
To: +Carl Mays (2802 )From: +Tom Murphy
Sunday, Oct 25 1998 1:13AM ET
Reply # of 2806
Here is the whole article on the San Diego Conference:
Analysts Paint Grim Semiconductor Landscape
(10/20/98 7:39 a.m. ET)
By Brian Fuller, EE Times
SAN DIEGO -- Like witnesses to a terrible train wreck, industry leaders are gathering
this week to get the latest casualty figures.
At the gloomiest Dataquest Semiconductor Conference in memory, held this year here
in San Diego, presenter after presenter ticked off the list of woes that have afflicted the
semiconductor industry and driven it into a recession for the second time in three years.
In almost every presentation, earlier grim forecasts have been revised downward since
their first presentation.
"Markets don't go up and up," said Donald Straszheim, president of the Milken Institute,
in Santa Monica, Calif. "They go up and down. Some of us had forgotten that."
Joseph Grenier, vice president and director of the Semiconductor Device Group at
Dataquest, in San Jose, Calif., said overcapacity, price pressure, and currency
depreciation would push the industry down 6 percent to 8 percent this year, to $138
billion. By comparison, the industry reached a high in 1995 of $151 billion. (Not so long
ago, industry pundits predicted a $300 billion semiconductor market by 2000).
--------------------------------------------------------------------------------
"Markets don't go up and up. They go up and down. Some of us had forgotten that."
-- Donald Straszheim
Milken Institute
--------------------------------------------------------------------------------
Through August, Grenier said, figures from the World Semiconductor Trade Statistics
group show the industry is off by an annualized rate of 10 percent, but, he said, "We're
expecting a good September, October, and November."
In the volatile DRAM market, revenue is expected to total $14 billion this year, down
sharply from the 1995 high of $42 billion. In addition, many high-growth semiconductor
segments are expected to slow down between now and 2002. While the total
semiconductor market, for instance, is forecast to show 11.5 percent compound annual
growth in the next five years, microprocessors are only expected to grow 10 percent --
the least of any of the seven product areas tracked by Dataquest. Cell-based ICs are
expected to grow 20.5 percent.
Slicing the data by region, total electronic-equipment production this year will grow by
modest amounts in every area except Japan and the Asia-Pacific region.
On a macroeconomic scale, Milken Institute's Straszheim painted a dire picture for
every corner of the world except the United States. Financial markets have fallen less in
the United States compared with eight other countries or regions, and the rate of decline
is less than in the world overall.
Pushed to make a forecast, Straszheim said, "The [Wall] Street forecasts are still
broadly too high. They'll be brought down kicking and screaming."
Straszheim had bleak outlooks for other areas. He was asked if Japan's best days are
past. "The answer to that question is yes," he said.
On Russia, he said, "It's going to be a disaster. That economy has no chance for the
foreseeable future."
On Malaysia's decision to put controls on its currency, Straszheim said, "It's too late for
Malaysia to turn around."
Dataquest's outlook for the semiconductor-equipment sector was revised downward in
a presentation by analyst Clark Fuhs. In July, he reported 1999 would be a year of
marginal improvement for capital spending, increasing to $33 billion from this year's
expected $31 billion. But Fuhs said Monday that he now thinks capital spending will fall
by 8 percent to 10 percent next year.
Silicon wafer demand, which Fuhs said in July would improve 3 percent next year, is
now forecast to be flat or down 2 percent in 1999.
"Overcapacity is still with us," he said.
Foundry overcapacity is also lingering -- between 30 percent to 35 percent this year,
but falling to 20 percent to 25 percent overcapacity next year. Companies need to hold
the line on capital spending for supply and demand to balance, Fuhs said. And half of all
foundry capacity is for 0.35- and 0.25-micron design rules, Fuhs said, but demand in
those areas is lagging.
Still, there is an upside in the distance, the Dataquest analysts said.
The overall semiconductor market should grow 11.8 percent in 1999, Grenier said.
DRAM devices should beef up to $52 billion in revenue by 2001 before another
overcapacity cycle kicks in, he added.
And there are plenty of growing application-specific markets, according to analyst
Gregory Sheppard, for everything from DSL and cable modems to DVD players and
automotive GPS.
Nevertheless, the sobering message of the first day of the three-day conference came
from Grenier.
"In the past, the semiconductor market has been relatively immune from world economic
cycles," he said. "No longer."
-- posted by Kirk
» Kirk - More Pain Yet? To: +William Bennett (8577 ) From: +T
More Pain Yet?
To: +William Bennett (8577 )
From: +Tom Murphy
Thursday, Oct 29 1998 1:49AM ET
Reply # of 8580
William, I like KLAC, but I think it is to early to bet on the SEMI Equipment Company's. I think
there is more pain yet. Here's a report for your review:
Semiconductor Equipment/Electronics
September - Worst Book-to-Bill on Record
The SEMI book-to-bill ratio for the 3 months ending September for all equipment in total was 0.57,
representing the worst ratio since SEMI began Publishing data in 1991. Total orders were down
16.1% from August levels.
- Bookings have now declined 71% from peak levels in November 1997.
- Front end orders for September were down 23.6% sequentially, after a decline of 24.2% in August.
- On an absolute basis, September order levels of $476.4 million are the lowest since March 1993.
- The front end ratio was 0.55 in September. This represents the worst ratio since SEMI began
publishing data in 1991, and the twelfth sequential reporting period during which growth in orders
has been less than growth in shipments.
Kirk Lindstrom
Editor: Personal Finance and Investing
Reading List
-- posted by Kirk
» Kirk - Prudential Securities on Friday said analyst John Pitzer initia
Prudential Securities on Friday said analyst John Pitzerinitiated coverage of eight semiconductor equipment companies, and said that while further
downside in the already weak sector will be limited, the likelihood of a recovery in the near
term is slim.
Kirk Lindstrom
Editor: Personal Finance and Investing
Reading List
-- posted by Kirk
» Kirk - Short AMAT at your own financial
To all: Portion of H&Q analysis of semiequip industry. Short AMAT at your own financial risk. --Jeff<<**** Hambrecht & Quist **** Hambrecht & Quist **** Hambrecht & Quist ****
Industry: Semiconductor Capital Equipment Firm: Hambrecht & QuistDate: 11/3/98
Semiconductor Capital Equipment: Moving from the Gutter to the Curb.
* We believe equipment orders picked up in October. In particular, we believe
Intel has started ordering for deployment of 0.18 micron. We believe Intel is
building out Ireland and Israel as well as expanding its facility in Chandler, Arizona. We also expect Micron to invest in its recently acquired fabs from Texas Instruments. Moreover, we expect other semiconductor companies to follow this lead.
* We characterize this activity as a move from the gutter to the curb--but it is improvement nonetheless.
* We continue to believe that recessions in the semiconductor industry are driven by supply. As an example, the DRAM market has declined by a (31%) CAGR over the last three years, from $41 billion in 1995 to an estimated $13.5 billion in 1998. At the same time, megabytes of DRAM consumed has grown at a rate of 90% over the same period of time. We believe a slowdown in demand has a smaller impact on the balance of supply and demand.
* We believe a combination of two factors will slow the growth of supply. One is a lack of investment. The second is a slowdown in the rapid succession of die shrinks at the 0.18 micron process node. We believe that this will necessitate accelerated capacity additions in the second half of 1999 and 2000.
* Over the last several weeks, the equipment stocks have moved dramatically off their bottoms. When we published The Value Perspective, the top picks in our universe were trading at 2-3 times book value and 1.4-2 times trailing revenues. After appreciating 30%-50% they are trading at 2.7-4 times book value and 2.3-3.1 times trailing sales. The valuations are not as compelling at current levels and we believe value investors are likely to move off to the sidelines.
* We believe there continues to be significant risk in the macroeconomic environment. Examples of possible negative catalysts would be a banking crisis in China or a continued decline in consumer confidence in the United States. Either of these factors could trigger a sell-off.
* We believe the stocks are trading at the high end of their range and would use market weakness to accumulate the highest quality quipment names and we would not recommend paying up for equipment stocks at this juncture.
We reiterate our Buy-on-weakness theme which we have emphasized all year. Our favorite names continue to be Novellus Systems, KLA-Tencor, Applied Materials, and ATMI.
Since we published our last piece, Semiconductor Equipment: The Value Perspective, picks in our equipment universe have appreciated 30%-50% in the last 5 weeks. Given the rapid change in sentiment and valuations, we believe it would be helpful to provide investors some data points on the sector as well as an analysis of supply and demand. Equipment Bookings Activity Orders for capital equipment clearly picked up in the month of October. In the beginning of the year, we had anticipated that Intel would start ordering for 0.18 micron equipment in the summer. By the end of September, orders for equipment from Intel were still anemic. However, we believe that Intel has now stepped up orders for equipment. We believe that the company is upgrading its fab in Ireland and building out the shell in Israel (which had been on hold); and we expect Intel to expand its fab in Chandler, Arizona, for 0.18 micron. We believe that when all these orders are placed, they could amount to as much as $1 billion to $1.5 billion. In addition, Intel invested $500 million in Micron, which the DRAM maker will use, along with $750 million in financing from TI--to upgrade its newly acquired TI fabs. The spending from these two companies are the most significant because they are the leading suppliers in the two most
important semiconductor segments, memory and microprocessors. We think the rest of the industry will follow their lead. Other companies are active as well. Samsung is building out the second phase of its Austin, Texas plant. There is also increased activity at AMD, NEC and TI. Activity is also increasing at Philips and STMicroelectronics. Finally, planning for new fabs has increased. During the summer, there were no new fabs on the drawing boards. Today there are two in the pipeline for production in 2000: the TSMC/Philips/Singapore joint venture and the IBM/Pacific Wire and Cable joint venture.
In talking to industry veterans last week, it was clear things are better. However, demand was so bad in the summer, it is hard to imagine it getting worse. Demand for equipment is still at depressed levels. The fact that the number of new fabs being planned can be counted on one hand is not indicative of a robust environment. Moreover, front-end equipment bookings for September 1998 as reported by SEMI were $316 million down 24% sequentially and 71% year-over-year. This was the lowest level since March of 1993. Add to this the fact that several of the equipment suppliers are still downsizing and optimism becomes tempered rather quickly.>>
-- posted by Kirk
» Alice_Rivlin - too technical for me
Kirk,Lately, especially after the bounce this group has enjoyed, I have noticed that both bullish and bearish arguments have become increasingly more technical, as opposed to the more common supply and demand estimates.
The bulls claim that the semiconductor equipment manufacturers will benefit from the need of chip makers to retool in order to take advantage of the latest technologies.
The bears counter by saying that because of existing advancements, fewer machines per device are needed when you can already fit more on a single wafer.
I am not an expert in this area and therefore cannot analyze these arguments adequately. Would you offer an opinion?
Thank you.
-- posted by Alice_Rivlin
» Kirk - table of short interest in semi-equip stocks
To: +Gottfried (7320 ) From: +John GFriday, Nov 13 1998 3:41AM ET Reply # of 7322
table of short interest in semi-equip stocks:
The list below is interesting. Keep in mind two opposing things:
* there is a high correlation between high short interest and a
bad outcome for a company. That's because shorts are often right.
* if the shorts are wrong, especially in their timing, then a high
short interest can add fuel to the fire of a rapid stock price rise.
Here's a list of short interest in Oct 98 for semi-equips:
stock, % of shares out shorted, days to cover at 30-day ave. volume
UTEK 13% 14 days
IPEC 9% 8
PRIA 8% 8
LRCX 7% 2
NVLS 8% 2
AMAT 4% 2
KLAC 4% 2
ASYT 4% 3
SFAM 3% 2
MTSN 2% 6
BRKS 2% 2
DPMI 2% 2
FSII 1% 3
GSNX 1% 2
SVGI 1% 1
SMTL 0% 0
MASK 1% 2
I haven't been following UTEK. Does anybody know why shorts would be so interested in them, compared to other small semi-equps?
Kirk's thoughts: I wonder if the Brinker Effect is what the shorts think is holding the stock up? With the large run-up in Lam recently, it seems that UTEK isn't that overvalued relative to the sector anymore.
Anyone have comments or other thoughts?
-- posted by Kirk
» Kirk - UTEK has a fairly strong product pipe line
To: +John G (7321 ) From: +Ian StrombergFriday, Nov 13 1998 10:15AM ET Reply # of 7322
John G.
UTEK has a fairly strong product pipe line. It's PSR, P/Bk and P/Cash Flow haven't fallen as much as those ratios for most other companies in the sector.
It's possible that this has attracted those who short based upon a macro, technical or reason other than the company's fundamentals.
Just a WAG, I really can't speak for the shorts, as I'm not one of them.
FWIW,
Ian.
-- posted by Kirk
» Kirk - Great Article....
Reticle Shortfall Could Endanger Chip Recoveryhttp://www.sumnet.com/enews/front/111698...
Exerpts:
"There is absolutely a huge problem coming up," said Art Zafiropoulo, president of Ultratech Stepper. "If there is a market turnaround, there may not be enough photomasks for quarter-micron and below." Delivery time of reticles, currently two days or less, could easily balloon to two weeks for leading edge mask sets, he added.
....
But even if reticle makers decide to go on a buying spree, there might not be enough e-beam machines that are used to make the reticles available from suppliers such as Etec Systems, Hayward, Calif., which produces at least 80 percent of that gear. Ultratech's Mr. Zafiropoulo contends that the industry will require about 80 e-beam machines a year to meet demand, but Etec will only be able to build 20 to 25 systems annually. Ultratech is developing a competing system through its UltraBeam Lithography subsidiary, but will only be able to manufacture from 10 to 14 machines next year, he said.
....
While Mr. Hutcheson thinks a shortage has already started, others believe the real crunch is still on the horizon. "It could very well be true that a shortage will exist by late next year," said Gerald Fleming, director of research for Van Kasper & Co., San Francisco. "I believe at some point in the next 12 to 18 months you'll start to see a shortage in high-end photomasks," said Mr. Hodess of NationsBanc.
-- posted by Kirk
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