Semi Equipment: Hints of Trouble in Memory Sector

With the recent swoon in pricing for both Flash and DRAM memories - and the semiconductor equipment industry increasingly reliant on the memory sector for growth - a nagging question is what happens in the equipment sector when the memory companies stop adding capacity. And while it hasn’t happened yet, there are hints of trouble.

The latest sign: A joint venture between Hynix and STMicroelectronics (STM), that is building DRAM and Flash capacity in China, has pushed out a $700 million semiconductor tool order by at least two months, according to a research note this morning from Citigroup’s Tim Arcuri. He says the pushout will result in about a 7% hit to front-end semi equipment tool makers in the second quarter.

Arcuri says “all vendors should be impacted,” but that the companies with the most exposure include Lam Research (LRCX), Mattson (MTSN) and Novellus (NVLS).

Arcuri notes that Hynix last month canceled some orders for tools for a Korean NAND flash plant.

Lam, Mattson and Novellus are all fractionally lower this morning.

LRCX vs. MTSN vs. NVLS 1-yr chart