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

To: BMcV who wrote (15770)	6/17/2004 8:44:42 AM
From: BMcV	Respond to of 95526

from CSFB yesterday: Semiconductor Equipment Underweight J.Pitzer SCE Weekly:Interconnect Conference Update •We attended the 7th annual IITC (International Interconnect Tech.Conf.)held in Burlingame,CA last week.The conference discussed technology issues & emerging trends in forming the metal interconnect stack.Mirroring observations made by industry experts in the SEMI-ISS earlier this year in January,TSMC noted in its keynote address that "BEOL"or "Back end of line"delay would increase faster than "FEOL"or "front end of line delay",especially at sub 130nm geometries. •RC (resistance-capacitance)delay driving chip speeds.Chip speeds depend upon transistor and interconnect delays.With each node shrink,transistor speeds typically increase ~2X,while interconnects speeds (delay)declines ~2X.180nm is the "cross over point"-at more advanced geometries,it is the interconnect delay that is the bottleneck for chip speeds.Design improvements (such as using repeaters/buffers)and/or material changes (such as low K,copper etc)are needed for each below 180nm to increase interconnect speeds. •New materials =New Issues =Higher costs?As an undesired consequence,new materials have increased the integration issues in wafer processing."Systematic"defects are expected to be over 50%of the yield killing defects over the next few years.Increasing material and integration challenges associated with progressive shrinks could "stretch"Moore's law and thereby increase R&D intensity for our companies.In addition,the increased collaboration up the value chain could also increase R&D intensity for the industry. •Could industry consolidate increase?Smaller "one-product"companies could find it increasingly difficult to respond to the increasing R&D intensity as well as support an increasingly global installed base.Companies that are most vulnerable to this trend include SMTL,MTSN,ACLS and VSEA;and to some extent -even LRCX.Technology trends such as slowing Moore's law could accelerate industry maturity;and for SCE companies,result in fewer,but larger players (ie we could see more mergers &acquisitions).Higher R&D intensity could also impact foundries,due to higher customer concentration and lower economies of scale at advanced nodes.Besides higher R&D intensity,a slowdown in Moore's law could impact upgrade investments and new applications that drive end demand.A business slowdown,if one were to occur in '05 could speed up this consolidation process.Another outcome could be emergence of new business models that stem from the "collaboration" theme.While the interplay between supply,demand and technology trends should make for an interesting debate longer term, stocks near term are stuck in a trading range lacking clearer visibility on these trends. •Semitool (SMTL,Not Rated,$10.85),Mattson Technology,Inc.(MTSN,Not Rated,$10.00),Axcelis Technologies (ACLS, $11.70,NEUTRAL [V ],TP $12.00,UW),Varian Semiconductor Equipment (VSEA,$35.43,NEUTRAL [V ],TP $33.50,UW), Lam Research (LRCX,$24.35,OUTPERFORM [V ],TP $37.00,UW),United Microelectronics (2303.TW,NT$23.40, UNDERPERFORM [V ],TP NT$21.00).