Taiwan spending cuts hit chip equipment stocks(NVLS=$27, KLAC $37, AMAT $15 , INTC $18)
By Daniel Sorid
NEW YORK, Aug 23 (Reuters) - U.S. semiconductor equipment
stocks dropped on Friday, as fears that budget cuts by Taiwan
chip makers could stall a long-expected recovery in the sales
of the tools that build and test microchips.
Banc of America Securities slashed its estimates on Friday
on a range of chip equipment makers, saying the earnings
potential of these companies would be hurt by weaker-than-
expected semiconductor capital spending.
The shares of the industry's dominant player, Applied
Materials Inc. <AMAT.O>, sank 92 cents, or 5.7 percent, to
$15.25 on Nasdaq, souring an August rally that had led the
stock up from a low of $12.76.
Other Friday losers were Brooks-PRI Automation Inc.
<BRKS.O>, whose tools manage the flow of silicon wafers through
a chip factory, which was off $3.05, or 13 percent, to $20.26
on Nasdaq. Teradyne Inc. <TER.N>, which makes testing tools
used in chip production, were off 69 cents, or 4.3 percent, to
$15.35 on the New York Stock Exchange.
Also on Nasdaq, KLA-Tencor fell $1.94, or 5 percent, to
$37.15, while DuPont Photomasks <DPMI.O> fell 78 cents, or 2.9
percent, to $25.93.
Banc of America analyst Mark FitzGerald said recent budget
cuts by Taiwanese foundries, or factories that build chips
designed by other companies, would hurt the future earnings of
Applied Materials and other chip equipment makers.
FitzGerald also expects Intel Corp.<INTC.O>, the world's
largest chip maker, to cut 2003 capital spending to $4.0
billion from a range of $5.0 billion to $5.3 billion this year.
Taiwan Semiconductor Manufacturing Co. Ltd.<2330.TW> , the
world's largest contract chip maker, on Thursday reported its
first drop in sales in five months, in line with market
expectations for a tough third quarter.
The company rattled investors two weeks ago by warning of a
downturn in July to September, a key quarter that kicks off the
year-end export peak period to meet holiday demand in the
United States, Europe and Japan.
The source of the latest weakness began when chip makers
boosted orders with Taiwan chip foundries, believing that an
economic recovery would lift demand for electronics, said
Merrill Lynch analyst Brett Hodess.
Because the economic recovery has been slower than some
chip makers expected, "many companies that used foundries in
Taiwan to make chips for them ordered too much and now they
have excess inventory of chips," Hodess said.
((Daniel Sorid, New York Newsdesk, 646-223-6187))
REUTERS
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