Merrill Research confirms dip as buying opportunity. Here are the details:
Semiconductor Capital Equipment
• During the conference call with Kulicke & Soffa (KLIC, $14 13/16, D-1-2-9), the
company mentioned they had push outs from a single customer in the quarter and they
had three or four other customers that were probably going to place slightly smaller
orders next quarter. As a result, Kulicke believes they will ship about 1600 bonders per
quarter, which is the second highest amount in their history. We believe this is far from
a weak market.
• Kulicke’s weakness seems to stem from the fact that some of the companies that
package chips are not getting as many finished wafers as they expected they would from
the foundries. We know that the foundries have been doing extremely well, but their
wafer growth was slightly lower than our estimates. This means that there is still
constrained capacity on the front end.
• We have checked with most of the major equipment companies in our sector and they
continue to forecast very strong second half orders. For example, Teradyne (TER,
$47 5/16, D-1-1-9), continues to see strong sequentially up orders for the September
quarter.
• We believe that what is happening at KLIC is an imbalance in the supply and demand
chain between front-end wafer makers and back-end assembly companies.
• We think that that the cycle is still intact and we will continue to see improving demand,
rising prices and tightening supply for semiconductors in the second half. For example,
yesterday, the semiconductor numbers for June came out. They showed an acceleration
in month to month unit shipments and increases in average selling prices. This indicates
fundamentally improving data for the front end side of the semiconductor industry.
• We do not believe this signals the end of the cycle.
(B. Hodess) |
