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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Robert Douglas who wrote (5338)	2/4/2003 1:04:57 PM
From: Jong Hyun Yoo	Read Replies (4) \| Respond to of 25522

Semiconductor equipment business is in a more fragile state than it has ever been for some time. This is especially so for AMAT compared to other competitors such as LRCX and NVLS. Although I remain bullish for AMAT on a long term basis, there are several factors that limit upside potential for this stock on the near to intermediate term. 1) chipmakers's purchase of the equipment will be focused on technology buy related to copper and sub 0.13 um processing. In these markets, AMAT does not hold very dominant position that it holds against the competitors. AMAT ECP and oxide etch business is struggling and unfortunately, these are where the growth is right now. 2) As 300 mm wafers are adopted, chipmakers need to buy fewer systems to pump out same capacity. Assuming the same yield for 200 and 300 mm wafers, chipmakers can manufacture 2.25X times more chips on 300 mm wafers than 200 mm conterparts. Yet 300 mm equipments sell just above 30% more than 200 mm equipments. I expect further erosion in 300 mm equipment pricing during next upturn which limit revenue upside potential. 3) Currently, growth of copper related market is not at the pace as fast as I have been expecting due to yield issues. When the yield issues are resolved ( I am not sure if this will happen within 6 months), there will be a big ramp in copper related business by major foundaries. Copper ramp may not be good news for AMAT as its traditional Al PVD,which accounts for more than 25% of the company revenue, will decline. Shrinkage of Al PVD business is happening already but at a modest rate due to this downturn. 4) AMAT is heavily exposed to Taiwanese foundary business. In fact, AMAT market share in UMC and TSMC is probably much higher than TEL, LRCX, and NVLS in all segment of the processing. Unfortunately, these foundaries are struggling with their business and cap ex reduction of 25 to 30% was announced last week. This does not bode well for AMAT. Despite these issues, I am positive on AMAT for long term. However, I have been less enthusiastic about the upside potential of the stock price in this sector. Have not been adding AMAT to my holding as I already have reasonable number of shares, I believe. If I had extra cash to invest in this sector, I am more inclined to purchase NVLS and LRCX shares as they have less outstanding shares and more EPS upside potential. I believe that there will be less inclination of market to award higher premium on AMAT shares due to issues that I have mentioned above.