From SSB:
The SEMICAP Beat, vol. 3, no. 29
September 30, 2002 SUMMARY
* Stocks flat for the week, despite continued
Glen Yeung deterioration in order conditions. Equipment makers
respond by continuing to rationalize operating expenses
(ACLS, VSEA). Chinese chipmakers renew expansion,
Karen Wang outline future plans.
* Consumables Slowdown. ATMI lowered expectations last
week. While 3Q02 situation is specific to ATMI, we
expect other consumables suppliers to face declines of
5-10% in 4Q02 (consistent w/ our models) as wafer starts
fall. Entegris reports Monday; we expect guidance to
reflect this expectation.
* Samsung Meeting to Shed Light on 4Q02 Orders. Korean
chipmaker to make final equipment order decisions to
shed light on slope of 4Q02 order decline. Our
expectation of 20-25% order declines for 4Q02(Dec)
anticipates a slowdown from Samsung.
* Expect stocks under pressure near-term but to perform
better as evidence of order bottom emerges in 4Q02;
longer term we overweight the sector.
OPINION
Overview. Equipment stocks finished flat for the week, as modestly better-
than-expected motherboard data, helped the group outperform the broader
indices. During the week, equipment companies again indicated that overall
business conditions continued to deteriorate each week; Micron, for example,
again revised its range of FY2003 capital spending downwards, now $800M-
$1.2B, from $1.0B-$1.5B. With orders potentially falling below even already
revised guidance (as in the case of Novellus), equipment companies are
responding with additional expense reductions (ACLS, VSEA, ATMI). However,
all is not lost, with SMIC, ASMC and Belling Semiconductor in China both
outlining plans for future expansion.
Consumables Slowdown. Late in the week, ATMI announced lower
expectations for 3Q02(Sep), driven principally from an inventory
build-up of its proprietary SDS gas delivery source. Overly-exuberant
expectations from Taiwanese chipmakers in 2Q02 caused a build-up in
SDS inventories that proved to be more than required as volume
forecasts declined for the foundries. While the 3Q02 situation is
specific to ATMI, we nonetheless expect other consumables-based
suppliers to face declines of 5-10% in 4Q02 as worldwide wafer starts
fall. Entegris Inc., who held an analyst event last week (see 9/26/02
note), will report on Monday. While we expect 4Q02(Aug) results to
meet the mid-point of guidance, we expect management to guide revenues
sequentially lower for 1Q03(Nov). Our recently revised estimates
reflect this expectation for ENTG, ATMI and MYK.
Samsung Meeting to Shed Light on 4Q02 Orders. Our checks indicate
that Samsung this week will decide with whom they will place the
orders they have recently been negotiating; up until late last week
Samsung was still negotiating on orders for Line 12. While we cannot
be certain at this stage that the company will in fact go ahead and
place the expected orders, we note that should the company not proceed
with orders, we believe our 20-25% order decline scenario for 4Q02
will play out. However, if the company goes forward, it is likely
that our 4Q02 forecast is slightly too pessimistic. We would also
expect to hear of order wins over the subsequent few weeks, given that
Samsung has typically allowed such announcements to be made.
Samsung's activity is reminiscent of orders placed for Line 10 in
4Q99. However, given the high degree of uncertainty in the current
end-market environment, we do not expect the same impact on industry
order patterns (Korea went from 2% to 14% of orders and showed a 901%
sequential increase in orders during that quarter) but rather to show
a better-than-20% decline.
Year to Date 6 Months to Date Week to Date
Best Performer SFAM 29.9% SFAM -8.2% EGLS 11.1%
Worst Performer TWAV -94.0% TWAV -93.6% TWAV -21.1%
Source: StockVal
Year to Date 6 Months to Date Week to Date
Selected Semiconductor -46.2% -58.0% -0.6%
Equipment Stocks
NASD -38.5% -34.4% -1.8%
S&P 500 -27.9% -27.7% -2.1%
SOX -52.8% -57.6% -0.9%
Source: StockVal
Source: StockVal
COMPETITIVE WINS
Agilent Technologies announced that Faraday Technology, a leading IC service
company, has selected the Agilent 93000 SoC (system on chip) series test
system to test Faraday's new USB 2.0 interconnect standard IP cores.
Brooks-PRI Automation (NR) announced today that a leading European
semiconductor manufacturer has ordered Brooks-PRI's integrated Computer
Integrated Manufacturing (CIM) software for a 300mm fab in Europe, and has
selected Brooks-PRI as its standard for CIM systems for all its future 300mm
fabs. Deployment of the multi-million dollar software and services order
began in the third quarter of fiscal 2002.
FEI Company (NR) announced it has received an order for its recently released
Defect Analyzer(TM) 300, an in-fab DualBeam(TM) system optimized for advanced
defect analysis on 300 mm wafers. The system was ordered by a leading foundry
based in Taiwan and will be installed later this year.
COMPANY NEWS
Advanced Semiconductor Manufacturing Corp. (ASMC) (NR) disclosed it will
install equipment into its new and initial 8-inch wafer fab in March of 2003,
with plans to enter into IC production as early as next summer. The fab will
have capacity of 5,000 wafers per month initially.
ASM International announced that its U.S. subsidiary will increase the
production of its 300-mm epitaxial reactor lines, based on multiple orders
received from two major IC makers that are developing chips equipped with
strained silicon.
ASML Holding N.V. expects lithography-tool shipments of 85-90 systems in
1H03, lower than 2H02. The company continues to expect shipments of 100
systems in 2H02.
ATMI reduced 3Q02(Sep) outlook for revenues to be in the range of $53.1-
54.9M, down 5-8% Q/Q. Loss per share is expected to be ($0.05-0.10). The
company attributed the decline in revenues to lower order rates for its SDS
products as a result of inventory build up in Asia combined with slowing
wafer starts.
Axcelis Technologies announced additional workforce reductions of 155
employees, or 7% of the workforce, for expected annual savings of $12M. A
$1.6M charge is expected in association with these actions. The company re-
affirmed its third quarter sales and revenue guidance.
ESIO announced that Global Testing Corporation has placed an order for 300mm
laser processing equipment to be installed it Global Testing's Hsinchu,
Taiwan facility. The equipment will ship during ESI's second fiscal quarter,
ending November, and will add to Global Testing's currently installed base of
ESI systems.
Isonics, (NR) a supplier of isotopically engineered materials, announced it
has established a silicon-on-insulator (SOI) wafer fabrication facility in
Vancouver, Wash. Its new Fab 1 plant is capable of producing 90,000 thick-
film SOI wafers per year in 100-mm to 200-mm diameters. These wafers
presently sell for between $150 and $350 each, depending on specification,
size and quantity.
KLA-Tencor reiterated its earlier guidance for revenues of $370-380M and EPS
of $0.25-0.26 while noting that business conditions were tough.
Lam Research launched its new 2300 Versys Star which features a new
technology to control the temperature and gas flow across the wafer. The
technology reduces CD variation by as much as 50%, according to the company.
Mattson Technology (NR) has developed new thermal control systems for anneal
processes and for low-temperature silicide formation on its RTP tools to
enhance the capabilities at below 90nm.
Micron has revised its fiscal 2003 capital investment plans to a range of
$800M to $1.2B, depending on market conditions. Last quarter Micron had
projected capex for the fiscal year ranging from $1.0B-$1.5B. Micron
estimated that 25% of wafer starts are now running the 130nm process, rising
to 50% by the end of the calendar year and rising to 70%-to-75% at the end of
calendar 1Q '03.
Novellus Systems stated that customer orders could be lower than the $200M in
3Q02, the lower end of order guidance provided by the company during its mid-
quarter update in August. The company has seen some cancellations.
Powerchip Semiconductor Corporation (PSC) (NR) expects to have capacity of
only 10,000 wafers per month by the end of the year, versus 15,000 as
planned. Equipment for the remaining 5,000 wafers is estimated to arrive in
place in the first quarter of 2003. The shortfall is reportedly due to
problems with CVD equipment that resulted in unsatisfactory yield rates for
the current 10,000-wafer capacity. PSC is said to be considering switching
to South Korea-based Jusung Engineering for its CVD equipment.
Semiconductor Manufacturing International Corporation (SMIC) (NR) has decided
to invest in four production lines in two phases in Beijing. The first phase
is an investment of US$1.25 billion to build an office building, an 8-inch
production line of 30,000-wafer monthly capacity and a 12-inch test line with
3,000-wafer monthly capacity. The second phase of investment will boost 12-
inch production capacity. The company's second and third wafer fabs have just
started manufacturing integrated circuits. Fab-2 is expected to be at a level
of production of 7000 wafer starts per month by the end of the year and Fab-
3, which SMIC asserts is the first Chinese wafer fab to have copper
interconnect capability, is expected to be producing 5000 wafers per month by
the end of the year.
Shanghai Belling (NR) plans to install equipment in the first quarter of 2003
and start pilot production in the first half of 2003, according to the
International Finance News. The foundry plans to begin volume production in
4Q03 at 2000 wafers per month.
Sharp held a ground-breaking ceremony on September 10 for a five-story
integrated factory in Kameyama Prefecture, Japan, which will consist of a
six-generation (6G) TFT LCD line and an LCD TV line. The company has
scheduled to complete its building construction by May 2003 and begin full-
scale production at the factory by May 2004. Its total invest will amount to
100 billion yen.
Soitec SA (NR) opened its second SOI wafer factory. The factory will provide
300-mm SOI wafers in commercial quantities. The company currently supplies
about 70 percent of the SOI wafer market.
Sony Semiconductor Kyushu, an affiliate of Sony, predicts its orders for
fiscal year 2002 (ending March 2003) will double to 30 billion yen, reported
Nikkei Business Publications. The company plans to invest an additional 100
billion yen in manufacturing equipment for its Kumamoto, Japan plant before
2005.
SpeedFam-IPEC (NR) reported F1Q03 sales of $33.8M, compared with the $27.1M
for the F4Q02 and $41.1M in the same quarter a year ago. Net loss was $6.5M,
or $0.21 per share.
Taiwan Semiconductor Manufacturing has pushed out the "risk production"
schedule for its 90-nm (0.09-micron) process technology by several months.
The company will also reduce its capex budget for 2002 to $1.6B, according to
Taiwanese newspaper reports.
Toshiba and Fujitsu have canceled plans to merge their semiconductor
businesses, which had previously been considered upon a joint announcement in
June of collaboration on SoC (system-on-a-chip) development, according to a
Kyodo news agency. Fujitsu's desire to keep its IC operation as a core
business was cited as the main reason for the turnaround in merger plans.
United Microelectronics Corporation (UMC) will not be manufacturing Athlon
processors for Advanced Micro Devices (AMD) until 2003, rather than by the
end of this year as UMC had previously indicated. Only chipset production
will be outsourced to UMC before the end of this year.
Varian Semiconductor Equipment Associates (NR) announced plans to cut its
workforce by about 15% to about 1,370 employees. These actions are expected
to reduce breakeven to ~$82M. Revenue for the September quarter is still
expected to range between $85-$105M with approximately breakeven on the
bottom line. The company will also take a restructuring charge of $3.4M.
CALENDAR OF EVENTS
Date Event
October 7, 2002 ENTG reports earnings
International Test Conference, Baltimore, MD
October 15, 2002 INTC reports earnings
Semicon Southwest
October 16, 2002 ATMI, MKSI, UTEK report earnings
October 17, 2002 SEMI North American Book to Bill ratio released
AEIS reports earnings
October 22, 2002 KLAC reports earnings
Companies Mentioned
ATMI Inc. (ATMI-$13.72; 3H)
Advanced Micro Devices Inc (AMD-$5.74; 3S) SSB analyst Jon Joseph
Applied Materials Inc. (AMAT-$11.82; 1H)
ASML Holding (ASML $6.71, 1H) SSB analyst Nav Sheera
ASM International (ASMI, $9.59, 1H) SSB analyst Katherine Thompson
Axcelis Technologies Inc. (ACLS-$4.64; 1H)
Electro Scientific Industries (ESIO-$14.37; 3H)
Fujitsu (6702.JP- JPY 528, 3H) SSB analyst Hiroshi Yoshihara
KLA-Tencor Corp. (KLAC-$28.68; 2H)
Lam Research (LRCX-$9.17; 1H)
Micron Technology (MU-$12.74; 1S) SSB analyst Jon Joseph
Novellus Systems (NVLS-$21.88; 1H)
Taiwan Semiconductor Manufacturing Corp. (TSM-$6.36; 2H) SSB analyst Andrew
Lu
Sharp (6753.jp, 1190JPY, 3H) SSB analyst Kiyotaka Teranishi
Sony (SNE, $42.40, 2H) SSB analyst Kiyotaka Teranishi
Toshiba (6502.JP, JPY 378, 2H) SSB analyst Hiroshi Yoshihara |
