Here's a nice promo from DLJ last night:
Analytical Angle -- Hefty demand boosts component makers
FRIDAY, AUGUST 11, 2000 11:45:00 PM EST
Aug. 11, 2000 (Electronic Buyers News - CMP via COMTEX) -- Demand for electronic components has never been as diverse as it is today. Accelerating demand for electronic components from virtually every end market resulted in continued earnings improvements in the June quarter.
AVX, General Semiconductor, Kemet, and Vishay each reported record sales, margins, and earnings, with several of their products, including tantalum capacitors, ceramic capacitors, and now resistors, on allocation. ASPs are still at record-high levels and should continue to rise during the September quarter.
Currently, there are the early signs of a pickup in the Asian consumer market. Large Japa-nese OEMs have realized that local component suppliers won't have the capacity to meet their increased needs. In an unprecedented move, these companies have expanded their reach and contacted U.S.-based component manufacturers to sign long-term supply agreements, at prices above levels we have assumed for 2001. We also continue to see strength in North America and an acceleration of orders in Asia and Europe.
The long-term supply agreements that component makers such as AVX, Kemet, and Vishay have put in place have essentially locked up all the incremental capacity scheduled to come on-stream over the next nine months. Early 2000 was when component manufacturers decided to add capacity, which began to come on line in May. AVX is increasing capacity by 50%, Kemet by 50%, and Vishay by 40% to 45%. These additions have begun to improve component availability; however, the supply/demand fundamentals remain tipped in the component makers' favor and are expected to continue to be so for several quarters.
Recent concerns regarding a potential weakening of end-market demand for cellular handsets has negatively affected the share-price performance of several component companies over the past couple of months. Investors worry that a lagged acceptance of third-generation cellular handsets will have a negative impact on the underlying demand for tantalum and ceramic capacitors. However, we believe that even with the scheduled capacity additions, the broad demand for electronic components will continue to strain supply.
Given the strength we are now seeing across the components market, we expect calendar 2000 for passive-component manufacturers will be a year characterized by strong double-digit revenue growth, improving margins, and substantial earnings gains both sequentially and year-over-year.
ebnonline.com
By: Mark Hassenberg; Donaldson, Lufkin & Jenrette Inc. Copyright 2000 CMP Media Inc. |
