Lehman on ASMLF and DUV:
Headline: ASM LITHOGRAPHY: 2H97 EPS Preview; DUV Demand Strong; Now #2 In Market
Author: Paul Brandeis 44-171-260-2535
Company: ASMLF
------------------------------------------------------------------------------
* ASML will report 2H97 results on Jan. 22nd. We expect results to be strong..
* ..due to demand for DUV equipment but earnings could come in below our...
* ...estimates due to timing of shipments to Korea.
* DUV demand is strong b/c of the lower costs & higher yields assoc. with it.
* Preliminary data for 97 shows ASML now #2 in the market ahead of Canon.
------------------------------------------------------------------------------
DON'T DISTRIBUTE TO RETAIL CLIENTS BEFORE CHECKING STATE BLUE SKY RESTRICTIONS
------------------------------------------------------------------------------
ASM Lithography will be reporting year-end 1997 results on January 22, 1998.
We believe that the company will report strong growth for 2H97 due to strong
adoption of DUV lithography. However, we believe that the results could come
in somewhat below our formal expectations due to Asian crisis, particularly
due to expected shipments late in the year to Korea which could have been
delayed.
Our current estimates call for the company to report earnings of NLG 2.60
($1.29) per share for 2H97 versus NLG 1.70 ($1.00) per share for 2H96 and NLG
1.68 ($0.89) per share for 1H97. Street consensus for 2H97 is $1.32 per
share.
However, we did reduce our estimates for the 1998-1999 period on December 12,
1997 to reflect the capital spending cuts by the Korean semiconductor
manufacturers as a result of the current economic and currency crisis
affecting the country. Samsung and Hyundai are both ASML customers, while LG
Semiconductor is not a customer at this time (LG has ASML machines in
evaluation).
Demand for DUV lithography tools continues to be strong led by the industry-wide
transition to equipment capable of producing 0.25 micron and below
linewidths as semiconductor companies look to accrue the substantial cost and
manufacturing benefits (lower costs and higher yields) associated with this
transition. For example, Intel (not currently a customer) plans to transition
all of its capacity to 0.25 micron from 0.35 micron by the end of 1998,
allowing the company to manufacture 200 Pentium II chips per 8" wafer compared
to the current 125 chips at the same cost. Moreover, Intel announced its
capital spending plans for 1998 up 18% to $5.3 billion from $4.5 billion in
1997 (the largest in the industry by a wide margin).
According to preliminary 1997 Dataquest estimates, ASML passed Canon and has
become the second largest photolithography supplier in the world (only
trailing Nikon) Moreover, Dataquest estimates that ASML overtook Canon in US-dollar
based revenues, while Canon continues to maintain a lead over ASML in
number of systems sold. We believe that ASML's market share for 1997
approached 25% compared to approximately 20% in 1996. Furthermore, we believe
ASML will clearly establish itself as the number two player in the market in
1998.
Long-Term Positives For ASML And Photolithography
Photolithography continues to be the single biggest enabler of the future of
semiconductor development (Technology Roadmap) and the one area in which
semiconductor companies must continue to invest in if they expect to remain
competitive in the industry. In the recently upgraded Technology Roadmap
published by the SIA (Semiconductor Industry Association) for the 1997-2012
timeframe, replacing its previous Roadmap introduced in 1994. The new Roadmap
calls for linewidths to decrease from the current 0.25 micron to 0.18 micron
in 1999, 0.15 micron in 2001 and eventually reach 0.05 micron by 2012. The
Roadmap also states that die shrinks will continue to be the most important
single factor in reducing semiconductor manufacturing costs. Moreover,
feature sizes that have historically been reduced every 3 years, but beginning
this year, they are projected to drop every 2 years through 2001.
Furthermore, DUV lithography is expected to be able to get down to 0.10 micron
linewidths.
We believe photolithography equipment and ASML will continue to outperform the
rest of the semiconductor equipment industry over the next several years as
industry moves to 0.25 micron and below linewidths. Despite the fact that the
timing of some shipments to Korea could be delayed due to the economic and
currency crisis, we are still estimating strong growth in 1998-1999
(significantly outpacing the industry). We expect the shares to continue to
be quite volatile in the near-term as additional news regarding the Asian
crisis continues to materialize but expect ASML to continue to report very
strong growth as the industry makes strategic investments in DUV lithography
and as the company continues to take market share. |
