Lehman Notes on the SVGL presentation
Highlights:
* Yesterday, Silicon Valley Group hosted an upbeat analyst meeting at the
company's engineering & manufacturing facilities in Connecticut to highlight
the photolithography division.
* SVGL emphasized its leading position in DUV lithography, claiming to have
shipped over 75% of the 204 total DUV installed at the top 25 chip makers by
the industry thus far.
* Management also introduced its 3rd generation 193nm step-and-scan machine, which is expected to ship by year end, and emphasized its firm commitment to
EUV lithography with plans to take orders for its 157nm R&D tool in 4Q99.
* Having ironed out its capacity bottleneck (production capability now stands
at 212 tools annually), the lithography division's chief hurdle is to expand
its customer base into Asia.
* We are encouraged by mgmt's outlook for the photolithography division, but
the company's other two divisions continue to face an uphill battle. In
light of this and the customer base issue, we remain neutral on the shares.
------------------------------------------------------------------------------
Summary:
Yesterday, Silicon Valley Group hosted an analyst meeting at the company's
engineering & manufacturing facilities in Connecticut to highlight the
photolithography division. The tone of the full-day meeting was upbeat and
management of the division made a convincing argument for its continued
success in DUV photolithography. At times, it seemed as though corporate
management was trying to contain the enthusiasm, and maintain more modest
expectations.
The Silicon Valley Group Lithography division (SVGL) emphasized its leading
position in DUV lithography, claiming to have shipped over 75% of the 204
total DUV tools installed at the top 25 chip makers by the industry thus far.
While management does not expect to ultimately maintain such a high market
share, it clearly expects to be the leader. Presenters made the argument
that their "opportunity for success has arrived" by virtue of: 1) its
significant investment in production-worthy step-and-scan technology,
including capital, engineering & manufacturing capability, and intellectual property, and 2) the formidable task of its competitors, which have
traditionally manufactured steppers, and will discover that the production of
commercially viable scanners will be far more difficult than they suspect.
SVGL laid out its plans for the industry's "most comprehensive lithography
roadmap". It introduced its 3rd generation 193nm step-and-scan machine, a
full production tool that is expected to ship by year-end. Management also
emphasized its firm commitment to EUV lithography with plans to take orders
for a 157nm R&D tool in 4Q99, and highlighted SVGL's efforts in 300mm.
Although a 300mm machine is not yet available, subassemblies have been
completed and the company expects to be ready when its customers require
300mm tools.
The $200 million investment in the engineering and production facility has
eliminated the capacity bottleneck (production capability now stands at 212
tools annually). The lithography division's chief hurdle now, is to expand
its customer base into Asia. Samsung is expected to purchase 10-20 steppers/
scanners over the next year, and SVGL believes that it has a good chance of
receiving a portion of the order.
We are encouraged by management's outlook for the photolithography division,
but the company's other two divisions (25-30% of fiscal 1999E sales) continue
to face an uphill battle (see note 1/19/99). In light of this and SVGL's
need to expand its photolithography customer base, we are taking a wait-and-see
attitude and remain neutral on the shares. |
