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Tokyo Electron Ltd. (TOELF)

- OTCPK - Current
  • Mon, Apr. 27, 3:24 AM
    • Applied Materials (NASDAQ:AMAT) and Tokyo Electron (OTCPK:TOELY) said they will scrap plans for a merger that would have created a company with a market value of $29B, citing problems with the U.S. Department of Justice.
    • The future of the deal was put into doubt earlier this year when the plan was delayed due to regulatory issues in several different countries.
    | 3 Comments
  • Thu, Feb. 19, 11:54 AM
    • South Korea's Fair Trade Commission plans to conditionally approve Applied Materials'  (NASDAQ:AMAT) merger with Tokyo Electron (OTCPK:TOELF +5%). The regulator adds it's talking with peers in six countries (inc. the U.S. and Japan) to nail down details for approving a deal.
    • A government official says Applied/Tokyo have agreed "not to launch combined chemical vapor deposition (CVD) and atomic layer deposition (ALD) businesses in Korea," and to also "establish new entities for fair competition, if necessary."
    • The announcement comes after Samsung and SK Hynix had voiced objections to the deal, which stands to create a colossus possessing ~25% of the global chip equipment market. The DOJ was reported in December to be vetting a buyer for assets Applied/Tokyo plan to divest to win U.S. regulatory approval.
    • Separately, Applied has filed proxy materials for its 2015 annual meeting (set for April 2). The company discloses CEO Gary Dickerson's compensation rose 59% in 2014 to $16.4M, thanks in part to a cash grant meant to avoid an excise tax that would apply to stock option awards following the closing of the Tokyo Electron deal.
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  • 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
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  • 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
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  • Dec. 2, 2014, 6:52 PM
    • The DOJ is "vetting a buyer of assets to be divested" by Applied Materials (NASDAQ:AMAT) and Tokyo Electron (OTCPK:TOELF) to win approval for their still-pending merger, TheStreet reports. The DOJ issued a second request for information back in Dec. 2013, three months after the deal was first announced.
    • Meanwhile, the Korea Times has reported Samsung, originally opposed to the deal, is urging Korean regulators to approve it after forming a new partnership with AMAT related to next-gen memory chip technologies. Korean approval is deemed likely to arrive "sometime in March or April."
    • Chinese and Japanese regulators also still have to vet the deal, which stands to create an industry giant. Morningstar observed last year Applied/Tokyo will have a 40% or greater share in six chip equipment markets.
    • TheStreet observes Tokyo, whose shareholders will own 32% of the merged company, still traded at a 10% discount to the merger price as of Monday.
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  • 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.
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  • Oct. 29, 2014, 4:19 AM
    • Tokyo Electron (OTCPK:TOELF), which is expected to be acquired by Applied Materials (NASDAQ:AMAT), has announced that the completion of their merger could take until next year due to delays in regulatory approvals.
    • Applied Materials agreed to buy Tokyo Electron in September of last year in an all-stock deal worth more than $10B, combining the two makers of chip-making gear as demand for their products slowed.
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  • Oct. 15, 2014, 2:43 PM
    • Declaring Applied Materials' (AMAT -2.1%) recent selloff has made shares "very attractive," BofA/Merrill's Krish Sankar has upgraded the chip equipment giant to Buy, while reiterating a $25 target.
    • Though bullish on the semi capital equipment cycle, Sankar argues Applied is "more of a restructuring story, making it cycle-agnostic in the intermediate term and not as susceptible to the noise around demand/yield."
    • He sees the Tokyo Electron (OTCPK:TOELF) merger (still being pored over by regulators) potentially closing in Q1, and thinks the post-merger company will have normalized earnings power of $1.80/share, assuming the wafer fab equipment market is worth $31B - Gartner has forecast $30.8B in 2014, and $34.1B in 2015. That implies shares only trade at 10x-11x normalized EPS.
    • Moreover, if the deal somehow fails to clear, Sankar only sees Applied falling to the $17-$18 range.
    • The upgrade hasn't done much to lift Applied, which is following the market lower. CLSA upgraded the company last week.
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  • 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%.
    | 3 Comments
  • Jul. 8, 2014, 6:27 PM
    • Applied Materials (AMAT) "made a compelling case that technology inflections could become tailwinds [for chip equipment demand] at the FinFET and 3D NAND transitions," writes Credit Suisse's John Pitzer after taking in the firm's analyst day (held at the Semicon West conference).
    • Pitzer adds AMAT sees $10B+ in cumulative revenue opportunities from the deposition and etching markets related to 3D NAND flash investments. However, he thinks Lam Research (LRCX), which just offered a bullish analyst day outlook of its own, is a better 3D NAND play.
    • Cowen's Timothy Arcuri argues strong FinFET (3D transistor) and 3D NAND capacity targets, together with healthy maintenance spend, "argues more re-rating for AMAT and the sector in general." At the same time, he's worried about the impact of 3D NAND growth on NAND supply, and thus the multiples afforded to SanDisk (SNDK), which has rallied strongly this year.
    • AMAT remains confident the Tokyo Electron (TOELF) merger will close this year. The post-merger company will call itself Eteris. Analyst Robert Maire thinks AMAT/Tokyo will buy Entegris (ENTG) once the deal closes.
    • KLA-Tencor (KLAC), though hiking its June quarter guidance, is a little cautious about near-term demand. "This is a quarter where we believe we're in a bit of a pause right now in the industry ... Bookings that we got, while strong, were really for foundry, and more for delivery and revenues that we'll see in calendar '15." Berenberg issued a cautious note last week.
    • Trade group SEMI now expects total chip equipment spend to grow 20.8% in 2014 to $38.4B, and 10.8% in 2015 to $42.6B.
    • Other industry names: ASML, UTEK, RTEC, KLIC, MTSN, ASMI, MKSI
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  • Jul. 7, 2014, 10:20 AM
    • Applied Materials (AMAT +1.1%) has been upgraded to Overweight by JPMorgan. The firm cites AMAT's chip equipment market positioning, optimism about a healthy market up-cycle, and a belief the Tokyo Electron (TOELF) merger will close in 2014.
    • Like others, JPM is upbeat about the synergies that will come from a merger set to create a company controlling ~1/4 of the global chip equipment market. "Management teams at both companies remain on focus to drive meaningful cost synergies post-deal closure and drive solid profit margin expansion and EPS growth over the next 18 - 24 months."
    • AMAT now +32% YTD, aided by solid order growth, expectations for rising orders from memory and logic/foundry clients amid investments in new processes (3D NAND, FinFET, etc.), and a belief industry consolidation will strengthen the hand of equipment vendors.
    • The industry's Semicon West conference starts tomorrow. Credit Suisse expects AMAT and peers to offer upbeat commentary for both 2H14 and 2015 demand. Berenberg is more cautious, arguing conservative spending from Intel, Samsung, and TSMC presents downside risk.
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  • Mar. 13, 2014, 6:37 PM
    • Lithography equipment giant ASML has "paused" the development of hardware meant to work with next-gen 450mm wafers, which offer 125% more wafer space (and thus better economies of scale) than current-gen 300mm wafers. Likewise, Applied Materials (AMAT) CEO Gary Dickerson says the 450mm migration "has definitely been pushed out from a timing standpoint."
    • Due to ASML's move, Intel (INTC), which agreed in 2012 to pour $4.1B into the company to help finance investments in 450mm wafers and EUV lithography, has "adjusted" the pace of its payments to ASML.
    • Last year, Intel began constructing a $2B Oregon development fab meant to be its first 450mm facility. But it's reevaluating its timetable amid soft PC demand and concerns about its share of the bill. Spokesman Chuck Mulloy: "We still believe 450 is the right thing to do ... But we have been clear: we will not do it ourselves."
    • EUV, considered necessary to maintain Moore's Law long-term, has also seen delays. ASML CEO Peter Wennink recently predicted EUV will reach the stability levels required by chip manufacturers by the 2H16 or 2017.
    • Other chip equipment makers: KLAC, LRCX, RTEC, NVMI, UTEK, TOELF
    | 6 Comments
  • Dec. 13, 2013, 2:50 PM
    • Applied Materials (AMAT) discloses the DOJ has provided it with a request for additional info related to its planned merger with fellow chip equipment giant Tokyo Electron (TOELF). AMAT still expects the deal to close in mid-2014 or 2H14.
    • Many have expected the Applied-Tokyo deal would face close scrutiny, given it stands to create a company with a dominant position in several chip equipment markets, and a total industry share (25.5% in 2012, per Gartner) roughly twice that of #2 ASML (12.8% 2012 share).
    • Morningstar's Andy Ng notes Applied/Tokyo will have a 40% or higher share in six markets - including the key etch (46% 2012 share) and deposition (59%) markets, which are expected to see solid growth as chipmakers ramp production of 3D NAND flash memory and chips featuring 3D/FinFET transistors. Lam Research (LRCX +0.4%) is Applied/Tokyo's biggest rival in each market.
    • Nonetheless, Ng argues chipmakers will back the deal, given the rising cost/complexity of chip manufacturing and the need for equipment vendors with huge R&D resources and diverse skill sets.
    | Comment!
  • Sep. 25, 2013, 4:11 AM
    • Applied Materials (AMAT) Executive Chairman Mike Splinter is confident that while regulators will take a "close look" at the company's proposed $7.1B acquisition of Tokyo Electron (TOELF.PK), the firm is "confident it will get approved."
    • Splinter doubts that overlap between Applied Materials' and Tokyo Electron's product lines will be a problem. "Where we actually compete, there is very, very little overlap," Splinter said.
    • Despite Splinter's optimism, top chip manufacturers such as Intel, Samsung, and TSMC could object to the deal.
    • The companies believe that they'll gain three points in market share from the merger, as well as improve the supply chain, save money and become more efficient.
    | Comment!
  • Sep. 24, 2013, 6:56 PM
    • Given the huge market shares Applied Materials (AMAT) and Tokyo Electron (TOELF.PK) stand to have in a many chip/display equipment verticals post-merger, antitrust regulators are expected to closely scrutinize the $29B deal. Top chip manufacturers such as Intel, Samsung, and TSMC could be among those to object to it, at least in the absence of some asset sales.
    • Gartner estimates Applied (14.4% share) and Tokyo (11.1% share) had over 1/4 of the global chip equipment market between them in 2012. ASML is assigned a 12.8% share, Lam Research (LRCX) 7.4%, and KLA-Tencor (KLAC) 6.5%.
    • If the deal goes through, it should bring some tax benefits on account of the post-merger company's plans to incorporate in The Netherlands (ASML's home turf). A source tells the FT the combined company will have a tax rate of just 17%.
    • Some analysts see the merger, like other recent deals, being motivated by the chip equipment industry's secular challenges. "It's all cyclical and no growth," remarks S&P's Angelo Zito.
    • Unsurprisingly, Applied offers a more positive take, arguing demand for cutting-edge mobile chips and the industry's race to commercialize EUV lithography (expected in the second half of the decade) presents growth opportunities for companies with superior products. Pac Crest made a similar argument yesterday, while recommending Applied, KLA, and Lam.
    • Gartner thinks chip equipment sales will fall 8.5% in 2013 to $34.6B after dropping 16.1% in 2012. But it also sees sales gradually rising to $49.1B in 2017.
    • Previous: merger announcement, details
    | 1 Comment
  • Sep. 24, 2013, 10:00 AM
    • Applied Materials (AMAT +6.4%) continues to shoot higher after announcing a $29B all-stock merger with fellow chip/LCD equipment maker Tokyo Electron (TOELF.PK), a move that stands to create an industry behemoth. Among chip equipment peers, only ASML (ASML +1.4%) comes close to matching AMAT/Tokyo Electron in size.
    • ASML and Lam Research (LRCX +2.1%) are up moderately in response to the deal, while KLA-Tencor (KLAC) is nearly unchanged. Tokyo Electron closed up 11.7% in Japan.
    • Tokyo Electron had FY13 (ended March '13) revenue of ¥497.3B ($5.03B). Applied is expected to generate FY13 (ends Oct. '13) revenue of $7.53B.
    • The combined company will have dual HQs in Tokyo and Santa Clara (there could be both integration and cultural challenges). Tokyo Electron chairman/CEO Tetsuro Higashi will be chairman, while new/well-respected Applied CEO Gary Dickerson will be CEO.
    • Applied and Tokyo assert the merged company's unmatched materials engineering capabilities will give it an edge in the mobile chip and display equipment markets. The deal is expected to close in "mid to second half of 2014."
    • The chip equipment industry has already seen plenty of consolidation; the Lam Research-Novellus and ASML-Cymer deals are two notable examples. Will Applied-Tokyo Electron fuel additional M&A activity?
    | Comment!
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Company Description
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Sector: Technology
Country: Japan