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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: StanX Long who wrote (13171)	1/30/2004 2:45:47 AM
From: StanX Long	Read Replies (1) \| Respond to of 95865

Taiwan Semi Upbeat on 2004 By K.C. Swanson TheStreet.com Staff Reporter 01/29/2004 11:07 AM EST Click here for more stories by K.C. Swanson Taiwan Semiconductor (TSM:NYSE ADS - commentary - research), the leading global foundry, said fourth-quarter earnings surged and predicted its blistering sector would do even better in 2004 than previously believed. In comments that bode well for chip-equipment makers, the company also forecast a dramatic hike in spending on semiconductor manufacturing gear. But with the upside largely expected, TSM shares were recently down 25 cents, or 2.2%, to $10.95. Taiwan Semi said earnings shot up by a factor of six to $479 million in the quarter, or 12 cents per American depositary share, on a 37.5% rise in revenue compared with the year-ago period. Fourth-quarter revenue was up 5.3% from the third quarter, reflecting a 13.5% increase in semiconductor wafer shipments, a 5.5% decline in average selling prices and the weaker dollar. Analysts were forecasting earnings of 11 cents per ADS on revenue of about $1.69 billion. The company told an investor conference in Taiwan that it sees global semiconductor revenue rising 26% in 2004, up from a previous estimate of 20% growth. For its part, the company expects first-quarter performance that is "at least as good as that of the fourth quarter." TSM expects its wafer shipments to rise by a percentage in the low single digits, with average selling prices declining and overall utilization at about 100% "or higher." It predicted demand rising in the communications sector, staying the same in the consumer sector and declining seasonally in the computer sector. TSM's guidance for a first quarter rise in shipments "appears to buck the trend historically, and points to the start of something seasonally better than normal for these guys," said Susquehanna Financial Group analyst Kevin Vassily. The 26% growth forecast issued by TSM "doesn't seem outlandish or unrealistic," said Vassily. If the industry does manage to grow at that rate, he believes foundries such as TSM could see top-line growth somewhere in excess of 30%. Vassily has a neutral rating on TSM. He's more positive on rival foundry United Microelectronics (UMC:NYSE - commentary - research), which is poised to benefit from the same demand trends but has an additional advantage: Because it lags behind on the technology front, it should see more leverage in selling prices as it shifts to advanced manufacturing processes (making chips with transistors only 130 nanometers apart), he said. Susquehanna doesn't do investment banking. In another important announcement, this morning TSM forecast 2004 capital expenditures of $2 billion, up from $1.2 billion last year. Patrick Ho, a chip equipment analyst at Moors & Cabot said the capex guidance was within his expectations. "It's encouraging that they said 90% of it is for equipment, since in previous years a higher percentage went towards the capacity building [which involved building a new fab] ," Ho said. "So not only is the number bigger than last year, but the percent targeted towards equipment is also larger." TSM estimates it will spend about three quarters of its equipment budget on 300 millimeter gear and another 10% to 15% on 200 millimeter hardware. "This is obviously positive for Applied Materials (AMAT:Nasdaq - commentary - research) and I think it will be reflected in their January earnings results when they report in mid-February," Ho added. Applied is the leading global supplier of equipment for semiconductor manufacturing. Other companies positioned to benefit from increased foundry spending, he believes, are KLA-Tencor (KLAC:Nasdaq - commentary - research), which makes measuring equipment, and Asyst Technologies (ASYT:Nasdaq - commentary - research), which sells wafer transporting systems used in factories. Moors and Cabot doesn't have investment banking relations with any of the named companies, but Ho owns shares of AMAT