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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Justa Werkenstiff who wrote (7611)	2/1/1999 10:36:00 PM
From: Ian@SI	Read Replies (3) \| Respond to of 10921

Justa, Following extract from ML SCE -25 Jan 1999 Top 25 spenders might shed some light on your question... Ian. +++++++++++++ The Cap-Ex Report This report highlights our projections of the cap-ex spending for the top 25 semiconductor companies in 1999. These 25 companies span the five principal semiconductor producing regions: US, Japan, Korea, Taiwan and Europe, and a wide variety of memory and logic devices. The top 25 historically account for approximately 80% of total semiconductor capital spending and, as such, accurately reflect industry trends. Semiconductor capital spending is utilized by device manufacturers to build and equip new fabrication plants (fabs). Therefore, an increase in cap-ex spending is a positive market indicator for the semiconductor equipment manufacturers and a decrease in capital spending is bad news for the equipment makers. Overview: 1999 Cap-Ex Spending Down 11% We are projecting the combined cap-ex spending for the 25 largest semiconductor companies at $19.6 billion in 1999. This is down 11% from the $22.1 billion these companies spent in 1998 and down 34% from the $29.7 billion these companies spent in 1997. The only region with a positive cap-ex growth estimate for 1999 is Korea. We believe cap-ex spending in Korea will increase 18% this year to US $2.4 billion, but would still be 58% below peak 1997 levels. Surprisingly, we are projecting the biggest percentage loss to occur among the US companies. We are projecting the US companies to reduce their cap-ex spending by 20% to $8.6 billion. We have identified only 7 new fab projects underway around the world. Cap-Ex spending on Equipment Should Be Relatively Flat Even though we are projecting that global semiconductor cap-ex spending will be down 11% in 1999, we believe that actual spending on semiconductor equipment will be flat year-over-year. Due to the predicted slowdown in the construction of new fabs in 1999 the semiconductor companies will be spending relatively little on “bricks and mortar”, instead focusing their resources on the purchase of new equipment to upgrade technology and expand capacity at existing fabs. This point was reinforced by recent Intel guidance for reduced overall cap-ex spending in 1999 but flat equipment spending. Today's Market Environment The semiconductor industry is an extremely dynamic industry that continuously drives device manufacturers to improve their production capabilities in order to improve their products performances. A few years ago these companies would buy new advanced equipment and build new fabs to stay on the forefront of technology. Today, however, the strategy has changed. There is now an increased emphasis placed on reusing existing equipment and implementing device shrinks to extend process capabilities several generations. Companies such as Intel and Texas Instruments will be able to reuse up to 80-90% of their equipment when they convert their fabs to 0.18um technology. This new strategy enables chip makers to increase production for a relatively small cost and should result in very little new fab construction in 1999. Spending will be focused on technology buys In 1999 a few semiconductor companies are planning to equip new fabs and several companies are planning to expand capacity at existing facilities but every company is planning to upgrade older facilities with new technology. We believe that technology buys will continue to be the strongest driver in the equipment sector throughout all of 1999. Products such as CMP, HDP, DUV Lithography and advanced process control, all required for the 0.18um production, should continue to be the hottest products this year. Chart 1: Worldwide Cap-Ex Spending 1997-9 doesn't copy very well... ;-) Table 1: Cap-Ex Spending By Region 1997 1998 1999 E United States 11,138 10,729 8,560 Percent Growth -3.7% -20.2% Japan 6,380 3,700 3,610 Percent Growth -42.0% -2.4% Taiwan 3,175 3,035 2,610 Percent Growth -4.4% -14.0% Korea 5,820 2,071 2,444 Percent Growth -64.4% 18.0% Europe 3,220 2,520 2,400 Percent Growth -21.7% -4.8% Top 25 Worldwide Total 29,733 22,055 19,624 Percent Growth -25.8% -11.0%