Caris Downgrades TSM, CHRT, KLAC, AMAT, NVLS

Caris & Co. semiconductor analyst Rich Whittington this morning said that orders at Taiwan Semiconductor (TSM) have weakened further than anticipated in the fourth quarter, with utilization rates likely to fall from the mid-high 80% range to 80% or lower. He says the company is now set up for for both lower revenue and margin guidance for the first quarter, as well as subdued 2007 outlook.

He sees similar trouble following at the other fabs, including United Microeletronics (UMC) and Chartered Semiconductor (CHRT). In response, Whittington has cut his ratings on both Taiwan Semi and Chartered to Average from Above Average. (He doesn’t officially cover UMC.)

He’s also cut his ratings on some semiconductor equipment stocks, “to reflect reduced near-to-mid-term visibility for chip capital spending.” He went to Above Average from Buy on KLA Tencor (KLAC) and to Average from Above Average on both Applied Materials (AMAT) and Novellus (NVLS). “This is predicated both on reduced visibility for two key customer segments (NAND and foundries) as well as increased risk of generalized margin erosion throughout the chip sector in 2007,” he wrote in a research note. “We believe the [second half 2007] outlook will firm, however, so regard this moderation in stance as relatively near term and note the continued positive rating on process yield management leader KLAC which we believe secularly benefits from the consumer focus of chip applications impelling quicker than past moves to cost-reducing next generation production processes.”

This afternoon:

* Taiwan Semiconductor is down 12 cents at $10.57.
* Chartered Semiconductor is down 12 cents at $7.98.
* KLA-Tencor is down $1.33 cents at $49.92.
* Applied Materials is down 37 cents at $17.86.
* Novellus is down 92 cents at $32.19.

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