This is from the LRCX thread but the information adeptly answers your question.
Brian, following is the comment from Smithbarney on
possible impact of Taiwan earthquake on semiequip companies.
My feeling is that the impact is minimal. If there is
any, it will be short-lived...
--SUMMARY:----Semiconductor Equipment
Major quake hits Taiwan (7.6 on Richter scale), knocking out power to
island. Major foundries such as TSMC, UMC, and WSMC are located in Taiwan.
Country represents 15-16% of semi capex and is a major region of growth.
Emergency power available; main power should be restored around noon Tues.
See 2-4 wk. disruption as fabs are requalified. Order perturbations may
result over the next 1-2 quarters but upstream pricing is healthy.
See little effect on equipment stocks valuations due to firm semi pricing.
Use weakness as buying opportunity.
--OPINION:------------------------------------------------------------------
Major Quake Rocks Taiwan
Early Tuesday morning in Taiwan, a major quake measuring 7.6 on the
Richter scale hit Taiwan. The epi center of the quake was in Nantou
(located in the center of island), which is approximately 80 miles south
of Hsinchu (the primary center of semiconductor manufacturing) and 80
miles northeast of T'ainan (an area of expansion for the island's
semiconductor industry). Fortunately, reports from the two largest
foundries, TSMC and UMC, revealed no preliminary structural damage and no
damage to the semiconductor fabrication equipment. However, primary power
was lost which caused disruptions to the manufacturing lines. The fabs do
have back-up power but the duration and magnitude of the power is
unclear. UMC reports that most fab equipment cannot be fully tested for
functionality until primary power is restored - which the company expects
around noon Tuesday in Taiwan.
Taiwan Is Growing In Importance For Equipment Suppliers
With many semiconductors adopting the fabless model and IDMs increasingly
outsourcing production to foundries in Taiwan to avoid the expense of
building a new fab for capacity additions, Taiwan has been gaining in
importance to both the semiconductor companies and the equipment
companies. Two of the world's largest foundries, TSMC and UMC, are
located in Taiwan, along with a host of smaller foundries and DRAM
suppliers. As a percentage of total worldwide capital expenditures, the
region has seen an increase from approximately 9% in 1995 to an estimated
18% in 1999. This figure is expected to stabilize at 17-18% in 2000. As
we can see from the table below, Taiwan's share of total worldwide
equipment bookings is expected to increase substantially in 2H99 from
1H99. A major disturbance to the island's manufacturing capabilities can
have important ramifications to order/sales patterns for the equipment
companies. For example, Taiwan represented 26% of Applied Materials'
total bookings of $1.46 billion in its latest quarter (3Q99), or $380
million.
Table 1: Taiwan as a Percentage of Total Worldwide Bookings
See Disturbances Due To Requalifying Efforts
While the fabs are apparently structurally sound and the equipment
appears to be undamaged, there is still the problem with the power
outage. The process of manufacturing a semiconductor chip is extremely
complex, involving 200-300 separate steps and even a minor disturbance
such as a brief power outage can wreak havoc. Manufacturing chips
necessitates a high-quality vacuum control environment and any disruption
can interfere with this delicate environment. Once an unanticipated break
occurs, it can take days and up to weeks to restore the environment and
requalify the entire process in one fab. Although primary power is
expected to be restored by noon Tuesday in Taiwan, we believe there could
be a 2-4 week disruption as engineers are re-deployed to focus on
requalifying the fabs and ensuring that they are running properly.
Resource Allocation of Engineers Could Cause Orders Perturbations In
Near-Term
Given that capacity in Taiwan is very tight (especially at 0.25 micron)
and excess engineers are scarce, we believe the process of taking
engineers away from issues regarding new equipment installations for fab
expansions in 1H00 and instead using them to focus on solving this
immediate problem could cause orders perturbations over the next 1-2
quarters. However, long-term expansion plans are unlikely to be affected
and we continue to expect Taiwan to be a primary region of bookings
growth in 2000 (we expect 24% year-over-year growth to $5.4 billion).
Look For Equipment Stocks To Hold Current Valuations
We believe there will be little effect on equipment stock valuations as
upstream pricing is firm (please refer to Jon Joseph/Clark Westmont
notes). Equipment stocks have always performed well when upstream pricing
is healthy and we see little from this event that will change this
pricing environment. Net-net, although there may be near-term
perturbations with respect to Taiwan's order intake, we believe equipment
stocks should support their current valuations. We would view any
weaknesses as a buying opportunity.
----------------------------------------------------------------------------
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--------------------------------------------------------------------------------
To: Brian Kerecz who wrote (3359)
From: Jong Hyun Yoo Tuesday, Sep 21 1999 11:21PM ET
Respond to Post # 3361 of 3361
Another comment from smithbarney on recent BTB ratio:
The book to bill remains above 1, which is healthy sign
of business condition. I expect LAM to achieve a little
higher BTB figure from the average value due to market
share gain in the etch business and new product momentum
in the CMP segment.
--SUMMARY:----Semiconductor Equipment
Aug. total equip. book-to-bill came in at 1.08, down from July's 1.11 and
June's 1.21. Sequentially total bookings down 3% with shipments flat.
Front-end b-to-b 1.04 from 1.06 (July). Orders down 3%, shipments down 1%.
Back-end b-to-b 1.21 from 1.28 (July). Orders down 3%, shipments up 3%.
Due to higher than expected revisions in the July data, front-end bookings
declined 3% vs. our flat-to-slightly up expectations (July f-e bookings
revised up 5%). Back-end book-to-bill inline with our expectations for a
figure around 1.20.
We see the top four equipment stocks (AMAT,KLAC,LRCX,NVLS) to keep
gradually trading upwards in their trading ranges over the next 6-12 mos.
--------------------------------------------------------------------------------
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LRCX: LAM RESEARCH(NASDAQ) Tuesday Sep 21, 1999 11:46PM ET
Symbol Last Trade
Change
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Volume
LRCX
4:01PM
62 3/16
- 2 9/16
-3.96%
64 3/8
61 5/8
607,600
Prev Close Open Bid Ask Last Tick Avg Volume 52-week range
64 3/4 64 3/8 62 1/8 62 3/16 Up 1,253,200 8 3/8 - 66
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