Applied delays recognition of 300-mm revenues, but sees 7 new fabs in 2001
By J. Robert Lineback
Semiconductor Business News
(08/11/00, 12:31:37 PM EDT)
SANTA CLARA, Calif. -- While Applied Materials Inc. pushes aggressively in 300-mm wafer processing tools, the semiconductor equipment giant isn't yet ready to officially record revenues from those systems, said company officials this week during a conference call with financial analysts. In fact, Applied has reversed itself and now wants to wait several more quarters to let customers fully evaluate the performance of its many 300-mm tools before reporting sales related to those systems.
The stance underscores just how difficult it is to nail down exactly when 300-mm wafer fabs become part of the industry's mainstream business. During the formal launch of 21 new 300-mm tools at Semicon West last month, Applied Materials officials predicted that as many as 175 tools for 300-mm wafers would be shipped by the end of 2000 (see July 10 story).
During this week's analyst conference call, Applied managers did not back off their bullish outlook for 300-mm equipment, but they did push back the timeframe when revenues would be recognized in quarterly results.
Many leading chip makers have begun to take delivery of 300-mm wafer tools from suppliers for pilot lines and development fabs, but often these shipments are evaluation systems with little or no money changing hands until a decision is made on which equipment will be used for production. Most analysts believe 300-mm (12-inch) wafer fabs won't become a factor in chip production until 2002 or 2003.
Top managers at Applied Materials have said the company is being paid for its 300-mm tool shipments. The Santa Clara equipment supplier began recording 300-mm bookings in its guidance for financial analysts in the fiscal third quarter, which ended July 30. But don't look for 300-mm revenues until at least the second quarter of Applied's fiscal 2001 year (which ends in the spring next year).
"We are pleased to report that the purchase of these products [300-mm fab tools] by customers reflects a completion of successful evaluations and positions Applied Materials to be the production tool of record in 300 mm," said Joseph R. Bronson, senior vice president, chief financial officer, and a member of the company's Office of the President. During Wednesday's conference call with financial analyst, Bronson said, "Revenues on 300-mm systems will not be recognized until detailed proving criteria are completed, which is expected in the first two quarters of 2001.
"Therefore, there will be no or inconsequential 300-mm revenue in Applied Materials' results in fiscal year 2000," he said, referring to the period that wraps up at the end of October. Three months ago, after releasing its second fiscal quarter results, Applied officials said the company would begin recording 300-mm revenues in the third quarter (see May 11 story), but now that has been pushed back by at least six to nine months while customers continue evaluations of tools and processes in pilot and development fabs.
No 300-mm revenues were included in Applied's record net sales of $2.73 billion in the third-fiscal quarter results. Those sales were up 25% sequentially from $2.19 billion in Applied's second fiscal quarter and were 83% higher than $1.49 billion in the quarter last year. Applied's net income was at $604 million and bookings for new tool orders were at a record $3.28 billion in the just-ended quarter (see Aug. 9 story). This was the first time Applied's booking have crossed the $3 billion mark.
Looking ahead, Bronson said the world's largest semiconductor equipment supplier expects new orders to increase again, exceeding $3.5 billion in the current fiscal quarter. In Applied's current fourth fiscal quarter, the company now anticipates net sales to be in the range of $2.85-to-2.9 billion "without any 300-mm revenue being quoted," Bronson told analysts. He said earnings per share in the current quarter are expected to be in the $0.73-0.75 range vs. $0.70 in the just-ended quarter.
Bronson, Applied chairman James C. Morgan, and senior vice president David N.K. Wang told financial analysts that the outlook for semiconductor capital spending remains strong into 2001. "There has never been a period in time the industry where we have seen such high growth rates across such a wide range of device segments," said Wang, who is a member of Applied's Office of the President.
In addition to strong growth driven by logic ICs for Internet applications and system-on-chips as well as flash memory for wireless systems, Applied is being told by its chip-making customers that the sluggish DRAM segment will soon join the wave of fab investments. In the just-ended fiscal third quarter, Applied's shipments to DRAM makers accounted for just 15% of its revenue, compared to 19% in the previous quarter, said Wang.
He told analysts that Applied's tool shipments to DRAM makers could rise to 20-25%--the industry average--by early next year. In 1995, during the last major DRAM shortage, about 50% of Applied's tool shipments were going to makers of dynamic memories, prior to the collapse of that market segment in 1996. The percentage of tools shipped to DRAM makers most likely won't be as high in this current build-up cycle because Internet and communications applications are requiring more logic devices than PCs, which drove the last upturn in the mid-1990s, according to Applied Materials officials.
However, DRAM makers are now bumping up against the limits of their installed production capacity, according to Wang, who has recently visited Applied's major customers in Asia. The problem is not only higher unit demand, but also the limits of existing tools to shrink feature sizes below 0.18 micron, he said. Both are leading toward DRAM shortages by the end of this year, Wang added.
"The DRAM [segment] probably is about balanced [right now], and it is the first time it really has been balanced. Even in 1995, with the huge peak in DRAM [the industry] was 10% over capacity," he told analysts. "If the [current] situation isn't solved...I believe toward the end of the year there will be a few percentage shortage [of DRAMs in the market]. DRAM investments will happen and probably with a mixture of both 200- and 300-mm."
Meanwhile, Applied officials said the booming flash memory segment remains strong despite some concerns about slowing growth rates of cellular phone handsets, which consume a large percentage of the nonvolatile memories. Wang said about $6 billion is now being invested in flash memory production, "which is equivalent to about four or six fabs with 30,000 wafer [starts] per month. We are talking about 150,000 wafers per month [total] or about 12 million [eight-inch] wafers per year that is an incremental increase for flash," he told analysts.
Overall, Applied sees new fabs and expansions of existing plants continuing at a strong pace. "We estimate that 13 new greenfield fabs will be built in 2000 and in addition to 16 major expansion for a total of 29 projects," said CFO Bronson. "In 2001, we expect 16 new fabs and 15 major new expansions for a total of 31 new projects. Seven of the new 2001 fabs will be 300 mm.
"The maximum capacity of fabs is increasing from a high of 30,000 eight-inch wafer starts per month to 60,000 wafer starts in 2001," he added. |
