Monday October 4, 10:02 am Eastern Time
Company Press Release
SOURCE: Banc of America Securities LLC
The Semiconductor Industry is Poised for a Long Upward Cycle, Banc of America Securities Analyst Tells Investors
SAN FRANCISCO, Oct. 4 /PRNewswire/ -- The following is being issued by Banc of America Securities, a member of the National Association of Securities Dealers, CRD number 26091:
The semiconductor industry is in the midst of a significant upswing being driven by both supply and demand, according to Richard Whittington, senior semiconductor analyst for Banc of America Securities.
(Photo: newscom.com )
''While the 1995 downturn in the semiconductor industry was supply-driven, the current upturn, which began in 1998, is both supply and demand driven,'' said Whittington.
Whittington's comments came at the 29th Annual Banc of America Securities' Investment Conference, which ran through October 1 at the Ritz-Carlton Hotel in San Francisco. This former Montgomery Securities' conference had a new name but boasted a program that lives up to its impressive reputation. The five-day conference featured 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.
Although the current upward trend in the semiconductor industry began in the fall of 1998, it was being inhibited by personal computer (PC) downsizing. The growth of the communications industry, on the other hand, has led the upturn. The first half of 1999 was marked by a tightening supply of semiconductors and improved demand. In fact, margins were increasing as early as the Spring. Continuing this trend, the second half of 1999 has been characterized by supply shortages in all major product categories, and surging, broad-based demand.
Whittington says that the current tightening of supply is the result of low capital expenditure between 1996-1999, aging fabrication plants and process transitions. New technologies are needed for high-speed networks and data forms. The supply balance was apparent in the first quarter of 1999, with shortages occurring in the first half of 1999 and increasing in the third quarter. The shortage list in the third quarter includes all nonvolatile memory: flash, electrically erasable programmable read-only memory (EEPROM) and erasable programmable read-only memory (EPROM), dynamic random access memory (DRAM), static random access memory (SRAM), passives and numerous other commodities.
Semiconductor production is also experiencing an aging capacity base, notes Whittington. In the last up cycle, the industry had difficulty transitioning to new technologies, and the scenario is replaying itself today as most fabrication facilities are incapable of manufacturing 0.21 micron and 0.18 micron chips.
In addition, demand is surging, primarily as a result of the growth of the communications industry, especially high-speed digital networks. Networks are pushing demand because they (1) have a long cycle-replacing an entire phone system, for instance, is a long process; (2) are highly differentiated; (3) have diverse standards and protocols; (4) are global in scope; and (5) are accelerating optical build out. Servers, Storage Area Networks (SANs), wireless communications, personal productivity instruments, and low-priced PCs are also contributing to the demand for semiconductors, but PCs are no longer the cycle driver.
As a result, semiconductors have ''The Power'' today, according to Whittington. In 1995, semiconductor content was capturing roughly 35 percent of electronic equipment sales. Whittington estimates that the industry will capture 23 percent in 1999 but he expects this number to rise above 30 percent by 2002.
Whittington estimates that the semiconductor market will grow into a $300 billion market by 2002, assuming a 9 percent compound aggregate growth rate in computing hardware, 15 percent in communications hardware, and yields of 28 percent off the 1999 base.
In this space, Whittington recommends Analog Devices (NYSE: ADI, $54-1/16, Strong Buy), Atmel (Nasdaq: ATML, $34-5/16, Strong Buy)*, Cypress (NYSE: CY, $23, Strong Buy), Integrated Device Technology (Nasdaq: IDTI, $18-7/8, Strong Buy)*, Intel (Nasdaq: INTC, $74-7/8, Buy)*, International Rectifier (NYSE: IRF, $16, Buy), Linear Technology (Nasdaq: LLTC, $59-13/16, Buy)*, Maxim Integrated Circuits (Nasdaq: MXIM, $66-7/8, Buy)*, Micrel (Nasdaq: MCRL, $43-7/8, Strong Buy)*, Micron (NYSE: MU, $71-3/4, Strong Buy)*, National Semiconductor (NYSE: NSM, $31-5/8, Buy)*, Semtech (Nasdaq: SMTC, $37-5/8, Strong Buy)*, STMicroelectronics (NYSE: STM, $77-1/4, Strong Buy), Texas Instruments (NYSE: TXN, $86-1/8, Strong Buy), and fabless semiconductor companies, Altera (Nasdaq: ALTR, $44-15/16, Buy)*, Lattice (Nasdaq: LSCC, $30-3/16, Buy)*, and Xilinx (Nasdaq: XLNX, $67-7/16, Buy)*.
Banc of America Securities LLC (NYSE: BAS - news), 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 Atmel; Integrated Device Technology; Intel; Linear Technology; Maxim Integrated Circuits; Micrel; Semtech; Altera; Lattice; and Xilinx. Banc of America Securities LLC was co-manager of a public offering for Micron Technology, Inc. in the last three years. Banc of America Securities LLC has performed investment banking or other services for National Semiconductor Corporation in the last three years.
SOURCE: Banc of America Securities LLC
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