Banc of America is out with a major call on Cymer (NASDAQ:CYMI) saying channel checks point to Gigaphoton, a Japanese competitor, now breaking into the US market in a big way.
Channel checks suggest Samsung's Austin fab recently chose Gigaphoton. BAC also believes that Intel has switched to Gigaphoton for all future purchases of KrF lasers, approximately 20-30 systems over the next two years. Intel will use CYMI for the ArF lasers. Gigaphoton has also broken into IBM, a much smaller account.
With these share losses in the US, they project CYMI's unit share of the excimer laser market to be 50% in 2008 versus ~60% in 2007.
CYMI's lead in ArF segment is not significant enough to demand a premium price. It has cut prices on its XLR laser recently to hold onto share. The firm is cutting their margin assumptions to reflect weaker pricing. FY'08 EPS estimates go from $2.70 to $2.28.
Maintains Neutral buy, lowers target to $35 from $40.
Notablecalls: Phew! This call is actionable. I fully expect CYMI to get hit today and in the near term. Gigaphoton being a threat is no news, but things were pretty much manageable just as long as the Japanese stayed in Asia. Now it's starting to look like they are coming into the US market in a big way. Giga has been supplying Samsung for quite some time already but the wins at Intel and IBM is where the real pain begins.
Gigaphoton already has deals in place with ASML and it looks like pricing will suffer going forward.
Mark FitzGerald and his cabal from BAC's Semiconductor Capital Equipment team have done a wonderful job covering CYMI.