July 11, 5:00 pm Eastern Time
Semiconductor equipment makers upbeat at meeting
By Therese Poletti
SAN FRANCISCO, July 11 (Reuters) - Manufacturers of the multimillion dollar equipment used to make computer chips will gather for their annual trade show here beginning Monday, amid a much-improved backdrop after last year's doom and gloom.
The badly bruised semiconductor equipment industry is still smarting from the longest-running downturn in the global chip and chip equipment industries.
But as semiconductor companies have mostly recovered from their three-year industry slump, they have been gradually ordering new equipment again, fueling a slow but growing recovery in the $21.8 billion equipment industry. So executives at this week's SEMICON West are expected to be very upbeat.
''It's going to be a big love-in,'' said Mike O'Brien, an analyst at SoundView Technology Group. ''It's going to be 180 degrees different from last year. It's going to be 'how great business is'...(Last year) there were just no orders. It was the worst downturn in 30 years.''
The industry's trade group, SEMI, plans to release a survey of member companies reflecting growing optimism and a forecast for industry revenues to grow 9 percent in 1999 to $23.8 billion, compared with a drop of 20.9 percent in 1998.
This forecast is also more bullish than the November survey, in which industry executives projected a 6.7 percent growth for 1999, up from 1998 total sales of $21.8 billion.
''I do see growth but I don't necessarily see a boom,'' said Stanley Myers, president of SEMI. ''Communications and networking are strong but they are not enough to provide a boom...I am very, very positive about the future. It could be long, slow growth, so it will last longer.''
The stocks of most chip equipment companies have returned to the trading range of their 52-week highs. Most are expected to post generally stronger-than-expected quarterly results, according to Gunnar Miller, a Goldman Sachs analyst.
The one remaining cloud hanging over the equipment industry's head is the volatile memory chip business, where pricing in on the downswing again, which could affect the equipment purchasing patterns by the big memory chip makers.
Still, the industry is especially jolly after some major chip makers such as Intel Corp., Motorola Inc. and Taiwan Semiconductor Manufacturing announced plans to begin using larger silicon wafers, which will require new 300 millimeter chip-making equipment.
The industry's much-anticipated move to this so-called 300 millimeter technology - where silicon wafers will be 300 millimeters (12 inches) across, up from the current 200 millimeters (8 inches) - had been delayed because of the Asian financial crises which erupted in July 1997. Bigger silicon wafers will enable chip makers to have more chips per wafer.
''The emphasis wasn't on it because of what happened in Asia in 1997,'' said Min Pang, an analyst with SG Cowen & Co. ''This is a trade show for customers and they will have 300 millimeter (products) on display, to tell them they are prepared.''
Another focus at the show will be new technology to use copper instead of aluminum to conduct electricity in computer chips, making them faster.
The rivalry between two companies battling it out on the copper front, Applied Materials Inc.,(Nasdaq:AMAT - news) the world's largest equipment maker in Santa Clara, Calif. and Novellus Systems Inc., (Nasdaq:NVLS - news) will be an undercurrent at SEMICON, as they compete for new customers and tout their recently introduced products.
Last year, San Jose, Calif.-based Novellus gained a big jump on Applied when it launched the first copper deposition tool in a partnership with Lam Research Inc. and other firms. Now, however, Applied is offering an entire copper system.
Both Applied Materials and Novellus are hosting analyst meetings at the show at 730 (PDT), causing analysts much grief during a hectic week of scheduled nonstop meetings ahead of second quarter earnings reports. Novellus's meeting, however is not at the Moscone Center but in an adjacent arts center.
''They (Novellus) have adopted a ''Star Wars'' theme and they have positioned themselves as the good guys against the dark force,'' said Pang. ''They never mention Applied Materials but it's very clear who they are talking about.''
(Nasdaq:AMAT - news), (Nasdaq:NVLS - news), (Nasdaq:LRCX - news), (NYSE:MOT - news),
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