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Semiconductor Stocks Poised To Gain As Economy Recovers; Credit Suisse Picks The Winners
* On Tuesday September 22, 2009, 3:01 pm EDT
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Companies:
o Intel Corporation
o Linear Technology Corp.
o Microchip Technology Inc.
67 WALL STREET, New York - September 22, 2009 - The Wall Street Transcript recently published its Semiconductors, Semiconductor Equipment, and Software Report report offering a timely review of the sector to serious investors and industry executives. This 115 page feature contains expert industry commentary through 25 in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Related Quotes
Symbol Price Change
INTC 19.37 -0.17
Chart for Intel Corporation
LLTC 27.50 +0.13
Chart for Linear Technology Corporation
MCHP 26.29 +0.05
Chart for Microchip Technology Incorporat
MU 8.10 -0.01
Chart for MICRON TECHNOLOGY
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Topics covered: DRAM Industry Reorganization -- Semiconductor Supply Chain Status -- Netbook Growth -- LCD TV Growth -- NAND Pricing and Demand -- Micro-Electro-Mechanical Systems (MEMS) Demand Cycle -- Ultra Low Voltage Processors -- Semiconductor Inventory Aging and Type -- Processor Power Developments
Companies include: Intel (INTC); Micron Technology (MU); Microsemi (MSCC); STEC, Inc. (STEC); National Semiconductor (NSM); Texas Instruments (TXN); Taiwan Semiconductor Manufacturing (TSM); ON Semiconductor (ONNN); Intersil (ISIL); Linear Technology Corporation (LLTC); Monolithic Power Systems (MPWR);Advanced Photonix (API); Waytronx Inc. (WYNX); LTX-Credence (LTXC); Mattson Technology Inc. (MTSN); Oclaro, Inc. (OCLR); Silicon Laboratories (SLAB); Microchip Technology, Inc. (MCHP); Cohu, Inc. (COHU); FSI International, Inc. (FSII); Jaco Electronics (JACO); Cadence Design Systems (CDNS); Synopsys (SNPS); Mentor Graphics (MENT); Magma Design Automation (LAVA)
In the following brief excerpt from just one of the 25 interviews in the 115 page report, John Pitzer of Credit Suisse discusses the outlook for the sector and for investors.
John Pitzer is a Managing Director, Global Technology Strategist, Technology Sector Head, and Semiconductor Analyst for Credit Suisse. He joined the group in March 2000 and until the end of 2005, was the Semiconductor Capital Equipment Analyst. Institutional Investor ranked him number two analyst for semiconductor capital equipment in 2005 and 2004; number one analyst for 2003 and 2002; and runner-up in 2001. From 2002 to 2005, he was ranked the number one or two analyst in the Greenwich polls. Prior to joining Credit Suisse, he was Vice President and semiconductor capital equipment analyst at Prudential Volpe Technology Group. He previously was an analyst at Deutsche Bank Alex-Brown and Needham & Company, covering the semiconductor, semiconductor capital equipment, and contract manufacturing industries. He holds a BA from Harvard University.
TWST: Are you are particularly optimistic about certain segments?
Mr. Pitzer: We are very bullish on the PC segment and I would include memory in that segment.
TWST: Which companies within this segment are you recommending?
Mr. Pitzer: We expect Intel (INTC) and Micron (MU) to outperform . The other area that looks interesting to us is the semiconductor companies with significant exposure to the industrial markets. In this segment we have outperform ratings on Linear (LLTC) and Microchip (MCHP). The reason we are bullishness on the industrial segment is that we think a lot of the inventory restocking trade has already happened in PCs and handsets. The area where production still is significantly below consumption is industrial. There is still a restocking trade out there, and it's going to be much more economically sensitive. But if the economy does come back, those companies are likely to see several quarters of accelerating growth. One thing that I think is really important is the idea that next peak's earnings for the group is going to be stronger than the market expects. What's really underpinning that view is the fact that supply growth for semiconductor production structurally is slowing. This is a big change from the last five to eight years, when - from a manufacturing, production and technology perspective - the semiconductor industry was making a transition from 200 millimeter (8 inch) wafer production to 300 millimeter (12 inch) wafer production. We believe this transition created an extended period of significant oversupply for the industry. It's one of the reasons why semis were forced to take on more of the inventory burden.
TWST: Would you be more specific about how the oversupply was created?
Mr. Pitzer: It was a significant improvement in the efficiency of the capital equipment spending. Typically, you had the 2.25x or 125% increase in the surface area of the wafer; that's just a typical, area = ' r2 geometric equation as you move from 200-millimeter wafers to 300-millimeter wafers. And the cost of building a new fab didn't go up nearly that much. So, what it meant was that your dollar of CapEx was significantly more productive. We have data on it. During the 200-millimeter era, supply grew at about 7.5% a year, and during the 300-millimeter transition, it actually jumped to about 12.5% a year. So it was almost a 50% increase in supply growth. Now that we are through the 300-millimeter transition, our view is that supply growth is going to slow. So it was almost a 50% increase in supply growth. Now that we are through the 300-millimeter transition, our view is that supply growth is going to slow. You no longer have that sort of stepped function improvement in your capital efficiency. If we are right and supply growth slows, we think we are going to be set up for a situation where, for the first time in five years, the semi customers are actually going to start to worry about availability.
TWST: And that would drive up prices?
Mr. Pitzer: Yes. It would drive up pricing. But, more importantly, it should redistribute some of that inventory burden which has increased for semi companies (as a percentage of total supply chain inventories) from 12% at the start of this decade to 24% currently, back towards the rest of the tech supply chain.
The Wall Street Transcript is a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs and research analysts. This 115 page special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online .
The Wall Street Transcript does not endorse the views of any interviewees nor does it make stock recommendations.
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