Tue, Jan. 27, 5:35 PM| 4 Comments
Fri, Jan. 16, 7:17 PM
- A day after some industry names outperformed modestly following news TSMC (NYSE:TSM) set a high 2015 capex budget of $11.5B-$12B, chip equipment makers generally traded in-line with a rising tech sector after another one of their big-3 customers, Intel, set a conservative 2015 capex budget of $9.5B-$10.5B.
- TSMC's 2015 budget is well above a 2014 capex level of $9.52B; the world's biggest foundry is both trying to keep up with rising mobile chip orders, and investing heavily to roll out its 16nm FinFET/FinFET+ processes to counter Samsung and Globalfoundries' 14nm FinFET rollouts.
- The midpoint of Intel's 2015 budget is slightly below 2014 spending of $10.1B, which itself was below prior guidance of $10.5B-$11.5B. It's also below 2011-2013 spending of $10.7B-$11B.
- Some cautiousness from Intel might have been expected: Gartner recently forecast industry capex would rise just 0.8% this year to $65.8B, albeit with wafer fab spend rising a healthier 6.7% to $33.7B. Gartner forecast memory capex would rise 13.5% and foundry capex 4.8%, but predicted logic capex (much of it from Intel) would decline 5.3%.
- Also: TSMC has disclosed it sold the 21M-share stake it took in ASML in 2012 for $1.5B, booking a $660M profit along the way. TSMC, Intel, and Samsung each invested in ASML with the goal of accelerating its EUV lithography R&D efforts (viewed as necessary to maintain Moore's Law long-term).
- Between them, Intel, TSMC, and Samsung account for over half of industry capex.
- Chip equipment firms: AMAT, KLAC, LRCX, TER, KLIC, ACLS, UTEK, RTEC, MTSN, ATE, XCRA, OTCPK:TOELF
Dec. 18, 2014, 10:34 AM
- Citi has added Applied Materials (AMAT +1.5%) its Focus List, and hiked its target all the way to $36. Meanwhile, Applied rival/David Einhorn favorite Lam Research (LRCX +2.1%) has been upgraded to Buy, and chip test equipment maker Teradyne (TER -0.1%) to downgraded to Neutral.
- Citi thinks Applied could deliver over $2.50/year in EPS once the Tokyo Electron (OTCPK:TOELF) merger closes - well above the $1.80 forecast in October by BofA. Regulators are still vetting the deal.
- Meanwhile, Japan's semi equipment trade association (SEAJ) has reported (.pdf) a November rolling 3-month book-to-bill of 1.33 for local equipment makers. That's well above October's 1.11 and September's 0.93.
- AMAT and LRCX are following markets higher - the Nasdaq is up 1.5% - while Teradyne is underperforming.
- Previous: Berenberg bullish on Applied and Lam, cautious on KLA and ASML
Dec. 13, 2014, 8:45 AM
- American Airlines (NASDAQ:AAL), Electronic Arts (NASDAQ:EA), and Lam Research (NASDAQ:LRCX) will be added to the Nasdaq 100 (NASDAQ:QQQ) ahead of the open on December 22.
- Removed will be Expedia (NASDAQ:EXPE), F5 Networks (NASDAQ:FFIV), and Maxim Integrated (NASDAQ:MXIM).
- A revision to the index methodology allows multiple share classes of index participants to be included, so Comcast Class A Special (NASDAQ:CMCSK), Twenty-First Century Fox Class B (NASDAQ:FOX), and Liberty Global Class C (NASDAQ:LBTYK) will also become part of the index.
- Source: Press Release
- ETFs: QQQ, PSQ, TQQQ, QID, SQQQ, QLD, QQEW, QQQE, QQXT
Nov. 28, 2014, 2:32 PM
- Berenberg's Tammy Qiu declares Applied Materials (AMAT - Buy reiterated) and Lam Research (LRCX - launched at Buy) to be two of her favorite chip equipment plays ahead of an expected 2015/2016 slowdown in semi capex.
- Like David Einhorn and others, Qiu expects Lam to gain chip equipment share thanks to strong exposure to the FinFET (3D transistor) etching and 3D NAND flash deposition/etching markets.
- Applied is expected to benefit from both FinFET/3D NAND exposure and Tokyo Electron (OTCPK:TOELF) merger synergies. Qiu: "We believe TEL can improve its margin following the merger with AMAT, from single-digit to above 20%, by exiting non-profitable business, optimizing operations and platform alignment with AMAT."
- She's less enthusiastic about KLA-Tencor (NASDAQ:KLAC) and ASML, launching the former at Hold and reiterating a Hold on the latter. Though liking KLA's process control share (helps with regards to FinFET exposure), Qiu considers shares fairly valued at 21x estimated FY15 (ends June '15) EPS.
- ASML, meanwhile, is expected to see a relatively slow EUV sales ramp. Qiu expects ASML to ship only 40 EUV tools in 2019, below management's guidance for 50-60. In addition, sales of ArFi lithography tools are expected to "decline over time due to re-use and efficiency improvements."
- Altogether, Qiu forecasts semi capex will grow just 2% in 2015 and decline 7% in 2016, after growing 12% in 2014. Memory capex is expected to fare better than foundry/logic capex.
Nov. 24, 2014, 12:26 PM
- Citing stronger-than-expected DRAM demand, a $1B buyback, the Inotera JV's Q3 results, and a weak yen, Goldman's James Covello has hiked his Micron (MU +1.8%) target by $3 to $32, albeit while reiterating a Neutral.
- SanDisk (SNDK +1.9%), which receives a favorable mention in Covello's note, is also outperforming. As is chip equipment maker Lam Research (LRCX +2.8%), which has considerable DRAM/NAND exposure and has seen its target hiked by $6 to $91. The Nasdaq is up 0.7%.
- Covello: "We are now modeling about 1% DRAM undersupply in 2015 (from balanced prior) ... Our new content estimates for phones, tablets and servers are now all modestly above third party forecasts to better reflect this."
- Nonetheless, Covello remains more partial to SanDisk, due to a belief the DRAM industry's EBIT margins (among the highest in the chip industry) are unsustainable. "We expect excess returns to continue to attract supply (creating upside risk to our 2015 base case supply estimate of 25% yoy) ... DRAM capex is up about 40% yoy in 2014E and tracking higher in 2015E." Bulls are counting on industry consolidation to keep a lid on supply growth.
Nov. 10, 2014, 5:02 PM
Oct. 22, 2014, 5:04 PM
- Though it beat FQ1 EPS estimates and posted in-line revenue, Lam Research (NASDAQ:LRCX) is guiding for FQ2 revenue of $1.23B (+/- $50M) and EPS of $1.12 (+/- $0.07), unfavorable to a consensus of $1.25B and $1.16. Shipments are expected to total $1.24B (+/- $50M).
- Gross margin rose 140 bps Y/Y in FQ1 to 43.9%, and op. margin 420 bps to 14.6%. A GM of 45.5% (+/- 1%) is expected in seasonally strong FQ2.
- Shipment growth by geography: U.S. (inc. Intel) +25%, Korea (inc. Samsung/SK Hynix) +16%, Taiwan (inc. TSMC) +21%, Japan +11%, China +8%, SE Asia +11%, Europe +8%.
- FQ1 results, PR
Oct. 22, 2014, 4:14 PM
Oct. 21, 2014, 5:35 PM
- ACTG, ALB, ALGT, AWH, BCR, BDN, CA, CAKE, CLB, CLGX, CLW, CTXS, CVA, EEFT, EFX, EGHT, FTK, FTNT, GGG, IBKC, INFN, LEG, LHO, LOGI, LRCX, MKSI, MKTO, MLNX, MSA, NOW, NXPI, ORLY, OTEX, PLCM, PLXS, RE, RJF, SCSS, SFG, SGMO, SHLM, SKX, SLG, SLM, SUSQ, T, TAL, TCBI, TER, TILE, TMK, TSCO, TYL, USTR, VAR, WFT, YELP
Oct. 13, 2014, 7:50 AM
Oct. 10, 2014, 9:59 AM
- Microchip's (MCHP -12.5%) calendar Q3 warning, which was accompanied by a declaration that it believes "another industry correction has begun and that this correction will be seen more broadly across the industry in the near future," is taking a heavy toll on chip stocks (SOXX -5.5%).
- Intel (INTC -4.2%) and many other chipmakers have joined the several firms that sold off AH yesterday in going in the same direction as Microchip: MU -5.8%. FSL -8.5%. BRCM -3.6%. SWKS -7.5%. RFMD -6.2%. XLNX -4.9%. MXIM -5%. AMBA -5.5%. IDTI -6.7%. CAVM -7.4%. AVGO -10.2%. SMTC -4.3%. SYNA -4.1%. POWI -6.9%.
- Chip equipment makers are also getting hit: AMAT -3.5%. KLAC -3.3%. LRCX -2.3%. UTEK -2.5%. KLIC -2%.
- As Microchip noted in yesterday's warning, the company's very diversified customer base, together with its recognition of distributor revenue on a customer sell-through basis rather than a distributor sell-in basis, often allow it to see industry changes before peers.
- The microcontroller vendor added its warning was driven by a September decline in sales to Chinese clients, and observed it has typically "returned to sequential revenue growth after two quarters" during past downturns.
- Chip stocks have had a good run over the last 12 months, aided by healthy mobile demand and the industry's consolidation wave.
Oct. 3, 2014, 4:47 PM
- Believing softer-than-expected foundry demand will take a toll in Q4 and 2015, ISI has downgraded KLA-Tencor (KLAC -0.5%) to Hold from Strong Buy. Shares ticked lower in spite of a 1% gain for the Nasdaq.
- KLA blamed light 14nm equipment orders from a foundry client (likely Samsung or Globalfoundries) for its soft calendar Q3 guidance. But the company also forecast demand would pick up in Q4, and said it was optimistic about 2015 (big 16nm/14nm investments have been expected).
- In addition to KLA, David Einhorn favorite Lam Research (LRCX +0.6%) has heavy foundry exposure. Einhorn and others have argued Lam is especially well-exposed to investments in technologies such as 3D transistors, multi-patterning, and 3D NAND flash, which are set to receive a disproportionate share of capex in the coming years.
Aug. 28, 2014, 4:28 PM
Aug. 15, 2014, 7:02 PM
- Applied Materials' (AMAT +6.3%) FQ4 guidance demonstrates its business is less cyclical than that of rivals KLA-Tencor (KLAC +1.4%) and Lam Research (LRCX +1.5%), argues Nomura. Whereas AMAT is guiding for flat Q/Q Oct. quarter revenue, KLA and Lam (more dependent on big foundry orders) are respectively forecasting 16% and 8% drops before expected rebounds.
- Nomura is also a fan of AMAT's strong Chinese display equipment exposure, and notes overlap with merger partner Tokyo Electron's (OTCPK:TOELF +5%) display ops is low.
- Jefferies echoes Lam Research's management (previous) by predicting technology inflections such as "a faster-than-expected 14nm FinFET ramp and a shift to flexible OLED by Samsung" will act as catalysts for AMAT over the next 6-18 months.
- Credit Suisse is more cautious: It likes AMAT's margin improvement, share gains, and exposure to display/solar recoveries, but also considers Lam a better play on investments in FinFET (3D transistors), multi-patterning, and 3D NAND flash. AMAT gets ~40% of its chip equipment revenue from chemical vapor deposition and etching products (account for a large portion of spending on cutting-edge processes), while Lam gets ~90%.
Jul. 31, 2014, 10:55 AM
- Like peer KLA-Tencor, Lam Research (LRCX +4.2%) provided a soft Sep. quarter outlook: It expects FQ1 revenue of $1.11B (+/- $50M) and EPS of $0.92 (+/- $0.07) vs. a consensus. of $1.15B and $1.00.
- But Lam also used its CC (transcript) to reiterate guidance for $32B in 2014 industry wafer fab equipment (WFE) spend, and for the company to outpace industry growth.
- It added foundry spend (30% of FQ4 shipments) is expected to strengthen thanks to FinFET (3D transistor) process investments, and that DRAM spend (39% of shipments) is benefiting from tight supplies. Lam also sees a healthy supply/demand balance for NAND flash, though it's a little cautious about near-term 3D NAND flash investments.
- Lam sees the share of WFE spending addressed by its products growing to 1/3 of WFE spend next year thanks to "technology inflections" (FinFET, 3D NAND, etc), and thinks its "technology inflections applications market share is in excess of 50% across [Lam's] portfolio of deposition edge and clean products."
- David Einhorn must be pleased with today's move.
- FQ4 results, PR
LRCX vs. ETF Alternatives
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