Second quarter equipment orders could be strong, though that could be undercut if aggressive capital expenditure are scaled back in the second due to the potential for DRAM overcapacity, wrote the RBC analyst, Stuart Muter, in a research note published Monday (Dec. 11).

Citing channel checks in Asia, Muter wrote that equipment orders from memory manufacturers look strong for the first quarter. "Checks with the major DRAM memory manufacturers in Taiwan suggest that Q2 2007 orders have the potential to be strong provided that the manufacturers follow through with their aggressive ramp plans for 2007," Muter wrote.

RBC expects chip foundries to continue struggling with weak capacity utilization and not buying equipment through the first quarter. The firm expects foundry orders to strengthen in the second quarter as the foundries prepare for a strong second half, Muter wrote. He added that the firm expects modest year-to-year increases in foundry capital equipment spending and that reports of Taiwan Semiconductor Manufacturing Co. (TSMC) increasing capital expenditures by 10 to 20 percent in 2007 are overly optimistic. RBC expects TSMC's 2007 capital expenditures to increase by 5 to 10 percent, Muter wrote.

RBC also believes that DRAM manufacturers are being overly optimistic about the prospects of a big uptick in demand related to the rollout of Microsoft's Windows Vista.

"The potential for DRAM oversupply, particularly in Q2 2007, is real and may cause some of the Taiwanese DRAM manufacturers to slow their aggressive ramp plans," Muter wrote. "We believe that Vista is a strong demand driver, but mostly in [the second half of 2007] and 2008, and we do not expect a surge in PC demand," in the first half of next year.

By: DocMemory
Copyright © 2023 CST, Inc. All Rights Reserved