Nice price action happening after Cohu has lagged of late.
As Cohu continues to make inroads in Metrology inspection and testing, it morphs a bit into the wheel house of KLAC.
This is a good forward looking article into KLAC's future:
- KLA Corp. is poised for growth as semiconductor manufacturing capacity increases domestically with the assistance of the CHIPS Act.
- The company is expected to benefit from the construction of regional AI factories, automotive ADAS systems, and AI-enabled smartphones and PCs.
- Investments in EUV lithography and advanced packaging will benefit KLA Corp. during the next cycle of investments for 3nm and 2nm chips.
Let's hope it rubs off on COHU!
Bob
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KLA Corp. (NASDAQ: KLAC) is nearing a cyclical upswing as customers are nearing their major capital allocations to semiconductor manufacturing equipment as they finalize the construction of their domestic foundries. The Semiconductor Industry Association, in partnership with Boston Consulting Group, projects that the domestic capacity for semiconductor manufacturing will grow by 3x from 2022 figures with the assistance of the CHIPS Act.
In addition to this, I believe the design cycle for advanced nodes will accelerate as competition for faster and more energy-efficient chips becomes fiercer, providing more room for KLA to growth across their products and services segments. I anticipate that much of the growth will be driven by the construction of regional AI factories, automotive ADAS systems with more content per vehicle, and AI-enabled smartphones and PCs. I rate KLAC shares with a BUY recommendation with a price target of $1,057/share at 27.60x eFY25 EV/aEBITDA.
Be sure to read my initial coverage of KLA Corp. here:
KLA Corp. Will Benefit From CHIPS Act And The Infrastructure Supercycle
KLA Corp. OperationsKLA is well positioned for a major cyclical upswing as the next generation of 3nm chips begin to ramp up with 2nm chips to follow. Much of the demand is associated with nearshoring the supply chain to the domestic fabs being built out as part of the CHIPS Act. As such, over half of the dedicated funding for foundry buildouts has been allocated to select semiconductor manufacturers in order to bolster the domestic production of advanced chips.
According to IEEE, the US will produce 28% of the world’s advanced logic chips by 2032. Intel Corp. ( INTC) is expected to invest $100b in new fabs with the goal of becoming the go-to foundry for advanced semiconductors. Though I’m hesitant to buy into Intel’s strategy as the firm is playing catch-up with its competitors in advanced chip design and production, Mr. Gelsinger remains optimistic in attaining business from competing chip designers. Intel will be building fabs in Arizona, Ohio, New Mexico, and Oregon as part of their $100b investment. One of the differentiators Mr. Gelsinger plans to bring to the table is providing EUV lithography as well as packaging to enable 2.5D and 3D chip tile-based designs.
Taiwan Semiconductor ( TSM) is also investing a significant amount into US-based chip manufacturing, which will likely maintain their chip design relationships with firms like Nvidia ( NVDA). TSMC will be building their fab in Arizona to manufacture 4nm chips. Management at TSMC mentioned in their q1’24 earnings call that the firm doubled their advanced packaging capacity from the previous year and is leveraging their OSAT partners to cover excess capacity demand. On the earnings call, management discussed that their customers are working with the chip manufacturer on N3 & N2 designs as power consumption remains a major challenge for AI factories.
Micron Technology ( MU) will be investing $50b through 2030 to construct fabs in Idaho and New York, which will likely bolster their DRAM & HBM production capacity. Management guided in their q3’24 earnings call that the Idaho fab will meaningfully ramp in 2027 with New York in 2028 or later. Management also mentioned that the firm will be enabling EUV in Japan to ramp the 1-gamma node. |
