MSDW issued a report on Cymer this morning.
Part I
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[Jay Deahna/Steven Pelayo; May 26, 1998]
On Thursday, May 20th and Friday, May 21st, in New York and Boston, respectively, we hosted the first Morgan Stanley Dean Witter Deep-Ultraviolet Photolithography Food Chain Mini-conference. Executives participating in the mini-conference represented the following companies: ASM Lithography. . . Cymer. . . DuPont Photomasks. . . and Etec Systems.
In our view, the primary conclusion from the conference is that leading-edge photomask demand is strong. Since July 1998[sic], about 400 deep-UV steppers and scanners have been installed in fabs around the world. Many of the initial systems were installed for chip makers that have captive photomask shops. However, broad-based adoption of 0.25-micron capable deep-UV photolithography systems has ramped significantly over the past two to three quarters. As a result, demand for 0.25-micron binary photomasks with high average selling prices (ASPs) and long write times is accelerating. At the same time, demand for phase shift masks (PSM) and optical proximity correction (OPC) masks is also rising as some chip makers stretch the limits of their i-line systems for critical lithography layers. Lastly, demand for extremely expensive 0.18-micron photomasks is in its initial stage.
Based on accelerating demand for advanced photomasks, leading-edge mask makers currently generating about 15%-20% of revenues from 0.25-micron mask production. At present, a substantially lower percentage of units are 0.25-microns and below. As 1998 and 1999 unfold, we expect mask makers to continue to operate at a high level of capacity utilization with an expanding base of mask pattern generation systems capable of 0.25-micron and smaller mask fabrication.
Demand for photomask pattern generation equipment is strong.
Demand for deep-UV photolithography systems is strong, but demand for i-line systems is weak.
Demand for Cymer's excimer lasers is strong from ASM Lithography, but Nikon and Canon are reducing work in progress inventory levels. However, our unit, revenue, and earnings estimates look good for the next two quarters. The upturn we are modeling in 4Q98 depends largely on Japanese chip makers executing back-end laoded F1998 (ends March 1999) capital spending plans.
Cymer will likely install more lasers than it ships in 2Q98, which we think is a positive in terms of working down inventory at Nikon and Canon.
Cymer's portfolio of lasers is growing, and demand is increasing for its leading-edge systems.
Demand for ASM Lithography's deep-UV photolithography systems remains strong. We continue to expect the company to ship its stated unit capacity in 1998 of 150 systems (our estimate is 155). I-Line photolithography system demand is weak due to a focus on die shrinks and limited new fab expansions, and our 1998 unit forecast for 95 i-Line systems could be 10-20 units high.
In summary, all of the executives that participated in our Deep-UV Mini-conference believe the fundamental basis of our thesis is sound and highly likely to occur. Our thesis assumes accelerating deep-UV photolithography system unit demand and advanced photomask demand, combined with substantial ASP increases will likely drive above average revenue and earnings growth for the companies in the food chain for the foreseeable future. That, in our opinion, will likely drive above average stock price performance for the companies in our Deep-UV Food Chain investment thesis, as well as the Morgan Stanley Dean Witter Food Chain Index relative to SOX.
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Part II, details on Cymer, when I get it done.
Pat |
