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Analyst see light in Semi Market
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Friday, February 28, 2003
Eleven equipment suppliers presenting at the Goldman Sachs Technology Conference this week ranged from cautiously optimistic to downright bullish, according to the financial analyst firm.
"While DRAM prices and geopolitical and macro risk cloud near-term visibility, we come away from the conference feeling incrementally more positive that the industry is headed in the right direction in 2003 and that investors with a six to nine month investment horizon will be rewarded for being early in the stocks," Goldman Sachs analysts James Covello and Amanda Hindlian stated in a research note
Companies presenting at the three-day conference included the companies in Goldman Sachs' coverage universe: Advanced Energy, KLA-Tencor, ATMI, Axcelis, Entegris, Applied Materials, Lam Research Credence, Novellus, Teradyne and MKS Instruments.
These companies reported a common belief that Q1 order books look solid, driven by DRAM, orders from IDM giants Intel and IBM. Early indications are that Q2 is shaping up to be a good quarter as well, but DRAM prices and geopolitical crises, such as an imminent war in Iraq are clouding visibility.
"Applied Materials continues to have a significantly more cautious tone than KLA-Tencor, Novellus, and Lam," Covello and Hindlian said. "We believe that Applied will remain more cautious until they get better visibility from the Taiwanese foundries and that we should expect another headcount reduction at Applied before we get the pickup in Taiwan."
It is Samsung that everyone is keeping an eye on, however. "Samsung looks to be the biggest swing factor for Q2," Covello and Hindlian wrote. "If Samsung places orders for phase 2 of Fab 12, its 300mm fab, then Q2 is likely to show sequential growth. If Samsung's orders get pushed into Q3, there could be an order air pocket in Q2 before order growth resumes in Q3."
But it's too early to speculate which way Samsung will go, the analysts concluded. It also appears as if DRAM spending is increasingly bifurcated with Samsung, Infineon and Micron continuing to press forward while smaller memory competitors cancel cap ex because of pricing issues, they said.
Goldman Sachs did suggest that foundry orders could return in Q3, however, which would give Applied a need boost.
"One of the drivers making foundry orders more likely in second half 2003 is that 0.13 micron yields have begun to improve across the customer base, with noticeable recent improvement from the Taiwanese foundries," Covello and Hindlian said. This should in turn drive business and orders from the foundries.
Companies at the technology conference also reported that business prospects in Japan continue to improve, citing increased spending patterns from several Japanese chipmakers including Sony, Toshiba, Fujitsu, and Matsushita, Goldman Sachs said.
It is a marked change from the end of 2002, particularly light of the Q4 and year-end statistics presented by Semicondutor Equipment and Materials International today. SEMI also suggested that a recovery in capacity expansion could occur in the second half of this year.
By: DocMemory
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