Lam shares certainly has been volatile lately.
Regardless of the share price movement, it is becoming
increasinly clear that there will be a shortage of capacity
to manufacture chips in the near and mid-midterm future.
My reasons for above statements are as follows:
1) Most of the capacity shortage are concentrated in the
smaller line with production, namely .25 um and below.
Many of today device increasingly use smaller feature size for various technical reasons: lower power consumption, increased performance, ect. However, only small number of
companies have made capital investment for the equipments that can manufacture at this geometry levels (Taiwanese foundaries, Samsung, Intel, TXN , MU) Companies that fell
behind in its capital investment will be forced to turn to
foundaries for new technology manufacturing. There may be
many idle capacities but they may be useless for current
devices. This means that only a few number of big companies
have the manufacturing capacity that can address today's
technological needs. With improving semi market, these companies will expand manufacturing scale and yet with
only a few of them having the resources and capability for
transition to finer line widths, oversupply will not likely
to develop.
2) Current yield at 0.18 um is lower that chipmakers would
like. Transition to smaller geometry is turning out to be
more challenging than initial expectation. This means that
the production level at 0.18 um are even more constrained
by the yield issues. If demand picks up at a rapid pace, chipmakers no choice but to start the green field construction. Even if they build more fabs, It will take
at least a year or longer for them to go online and capacity
shortage will likely to last in the near future.
3) There are plenty of consumer and PC products that are
in the pipeline that can stimulate the semiconductor market.
Faster processor, digital camera, DVD players, MP3 music
players, CD-Rewriters, Video game players (SONY, SEGA,
NINTENDO), HDTV, networking equipments, ect...
Above trends bode well for LAM. I think LAM can achieve
roughly $400 million for Q at some time in the fiscal year
2001 and looking for EPS of about $5 a share. Lam's market
penetration in the oxide and CMP market should bring
very substantial additional revenue for the company. AMAT
IPS dielectric etchers are struggling to gain market acceptance and TEL is having its own problems in the oxide
market as well. The share price will remain volatile and
when the smoke clears, share price will be much higher
than what it is now.( hard to believe after the huge runup,
isn't it?) |
