You own three solid stocks. As a group, they should track the
semiconductor equipment maker average nicely. AMAT and NVLS
both make equipment that put down a variety of films including the
fast-growing area of dielectrics. These layers are used to planarize
wafer surfaces and to isolate electrically one current-carrying layer
from another. As wafer production continues to go to more and more
layers of metal, the demand for these machines will increase. AMAT
and LRCX compete against one another in the area of Etch equipment.
Etch equipment is needed to etch back thick, conformal films and
to etch the patterns in the photoresist into the underlying films.
All of your stocks are good, long-term buys. Lam looks the cheapest
to me based on the PE multiple expansion that I expect as margins
improve due to the trends I discussed in previous postings, but all of
your choices are fine.
KLIC (Kulicke and Soffa) makes back-end test equipment. Their
earnings in the last quarter were up 273% on a 147% increase in
revenues. They are expected to earn $3.15/share this year giving
them an estimated PE of about 7 or a P/E based on trailing earnings
of 8. They are a solid company and they should do fine long-term.
I just don't see any industry trends that will help them continue to
outperform the rest of the semiconductor industry. The test equipment
purchases for DRAM's don't look encouraging. For logic, 6th generation
CPU's should be able to be tested using 5th generation equipment.
For emerging markets like FLASH memory, the testing requirements
are not difficult, so new equipment will probably not be necessary. I'm
just not too excited by this company--even though, you would have
done very well with them over the last couple years.
About TNCR (Tencor) and KLAC (KLA), they both make contamination
monitoring equipment. They may have other product offerings, but the
ones I am familiar with at Tencor rely on laser scattering off wafer
surfaces to define the sizes and locations of contaminants. The KLA
strategy is to look optically for contrast differences in one region of the
wafer relative to another. Anyway, the technical details are not that
important--they both work better for different applications. The reason
I favor KLA's technology is that many fabs are using their equipment
as a replacement for human inspectors. One fab that I am aware of
has a dozen KLA tools that look at every wafer of every lot at many
points in the production process. This is a significant departure from
the norm where one metrology tool (or two) is used to support the
needs of an entire fab. As geometries continue to shrink, I expect
this trend to accelerate. I don't know any companies that use TNCR
equipment to the same extent, though it is possible that some do.
As to the SRAM market, I do not have any direct knowledge of the
demand picture there. I have heard anecdotal evidence that the
prices are continuing to drop and that INTC slowed purchases while
they work down an excess inventory of motherboards.
To answer your question about how I keep up with the industry,
I work for a semiconductor manufacturer as a manager. I used to be
an engineer and have used all of the equipment that I have touched
on here except the KLIC testers (we use testers from other suppliers).
I am not working for a couple of days, so I am making some postings,
but I will not be able to post at the same rate in the future. |
