Semiconductor and Semiconductor Equipment Market Rebound
Are in The Early Stages According to Semiconductor Capital Equipment Analyst At Banc of America Securities
SAN FRANCISCO, Sept. 29 /PRNewswire/ -- The demand for new technology and the need for greater capacity are driving the rebound of the semiconductor market, according to Brett Hodess, senior research analyst who follows the industry for Banc of America Securities.
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``We predicted a turnaround in the semiconductor equipment market a year ago at this conference, and it's happening,' said Hodess. ``All the ingredients for the semiconductor equipment growth cycle are falling into place.'
Hodess' comments came at the 29th Annual Banc of America Securities' Investment Conference, which runs from September 27 through October 1 at the Ritz-Carlton Hotel in San Francisco. This former Montgomery Securities' conference bears a new name but boasts a program that lives up to its impressive reputation. The five-day conference features 250 presentations from companies that are driving the Business Services, Consumer & Retail, Energy, Entertainment, Media & Telecom, Financial Services, Health Care, Industrial Growth, Real Estate & Lodging and Technology industries.
Hodess asserts that the semiconductor industry is poised for growth as a result of the demand created by ``free' PCs and cheap bandwidth and the need for new technology that drives the performance, lower power and lower cost necessary to deliver these computing and communications improvements. Hodess predicts that new fab activity should drive spending growth of over 20% in 2000 and 40% in 2001.
New PCs, from high-end to low-end, depend upon leading edge semiconductors with 88 percent of PC semiconductor content requiring advanced processes, says Hodess. It's not just the microprocessor, which represent 57% of the cost of ICs in a PC that requires advanced capacity anymore.
Cheaper bandwidth also relies on semiconductor process technology advancements, and communications-specific integrated circuits (ICs), so-called ``Systems on a Chip' (SOC), notes Hodess. The companies that sell these application-specific chips are greatly concerned with time to market in order to succeed. As a result, they rely on leading edge processes to help achieve performance and cost goals more quickly. Moreover, with 95 percent of intellectual property in communications hardware contained on two to three ICs, the ability to test complex chips is in great demand.
Hodess reports that wafer fabrication utilization rates have increased for the third quarter in a row to reach 91%. Demand has been greatest in leading edge technologies with sub 0.3 micron utilization at 95%. Most leading edge capacity has come from fab upgrades. However, as capacity tightens and technology changes abound, the industry is on a verge of building new fabs again, says Hodess. In fact, today's semiconductor fab investment outlook resembles the outlook at the start of the cycle of early 1993.
Hodess believes investors should focus on companies involved in new materials, productivity enhancement, and system-on-a chip solutions, in addition to market share leaders that can leverage their position into meaningful new markets. Along these lines, Hodess' stock picks are large cap companies Novellus Systems, Inc.*, and Teradyne, Inc.*, and small cap concerns, Electro Scientific Industries, Inc.*, Asyst Technologies, Inc.*, and MKS Instruments, Inc.*
Banc of America Securities LLC (BAS), a subsidiary of Bank of America Corporation, is a full-service investment bank and brokerage firm. With principal offices in San Francisco, New York City and Charlotte, BAS employs more than 4,000 associates in offices around the country, and with affiliates, offers capabilities worldwide.
Bank of America Corporation, with $614 billion in total assets, is the holding company for one of the largest banks in the U.S., with operations in 21 states and the District of Columbia.
Banc of America Securities LLC currently maintains a market in NVLS, ESIO, ASYT, MKSI. Banc of America Securities LLC was manager of a public offering for MKSI in the last three years. Banc of America Securities LLC has performed investment banking or other services for ASYT in the last three years. In the ordinary course of business, BAS has obtained a substantial position in MKSI. |
