AMKR Is Recommended by NationsBank Montgomery Securities
SOURCE: NationsBanc Montgomery Securities LLC
Semiconductor Industry Has Rebounded From Steep Downturn: Recovery Should Last Two-to-Three Years, According to NationsBanc Montgomery Analyst
SAN FRANCISCO, Feb. 4 /PRNewswire/ -- The following is being issued by NationsBanc Montgomery Securities, a member of the National Association of Securities Dealers, CRD number 26091:
After a severe 18-month downturn, the semiconductor industry has rebounded and is in the beginning stages of a two-to-three year recovery, according to Jonathan Joseph, senior semiconductor analyst for NationsBanc Montgomery Securities LLC.
Investors already have jumped on this trend, bidding up semiconductor stocks to all-time highs, but Joseph believes that the stocks still are attractively valued compared to the S&P 400 and that they could go higher on positive news coming out of the industry.
Joseph's remarks came at the 16th annual NationsBanc Montgomery Securities Technology Week Conference. More than 1,600 professional money managers and company executives are attending Technology Week '99, which has included presentations by 162 public and 56 private industry-leading companies, including Amazon.com, Cisco Systems, Hewlett-Packard, Intel, National Semiconductor, Oracle, PeopleSoft, Quantum, SAP America, Seagate Technology and Sun Microsystems.
Joseph said that at this stage of the cycle, semiconductor companies are shipping products faster than they are adding new production capacity, which is a ''very good sign'' of the industry's health, Joseph said.
The growing markets for personal computers and network communications equipment are driving the rebound in the semiconductor industry, Joseph said. PCs account for 55 percent of semiconductor shipments, while demand for communications components is expected to grow at a 20 percent compound annual pace, the analyst said.
Microprocessors, which account for 37 percent of the market, are leading the recovery. Intel Corp. [Nasdaq:INTC - news], the market leader, continues to enjoy firm average selling prices (ASPs), while competitors, such as Cyrix and Advanced Micro Devices, have seen their prices drop dramatically. Joseph's current forecast is that the microprocessor market will not peak before the end of 1999, if historical trends hold.
Digital signal processors (DSPs), which are very specialized semiconductors that are used in devices such as wireless phones, comprise another fast-growing segment of the market, as they penetrate into consumer products. Joseph expects the DSP market to reaccelerate, with shipments growing 27 percent annually over the next three years.
In the memory market, where most of the over-capacity problems have occurred, prices have been firming, Joseph said. While increasing demand is absorbing current production capacity, Joseph believes that the industry may actually be headed for a production shortfall as another aftershock of the Asian financial crisis.
''We could have a severe shortage of memory in 2000 if the Japanese and Koreans don't start spending on new fabrication facilities,'' Joseph said. However, the Japanese and Korean companies will have a hard time financing the new facilities, which typically cost several hundred million dollars each, and there are no other new players coming into the market to pick up the slack, Joseph said.
Joseph recommended three large-cap semiconductor stocks: Intel*, Micron Technology* and Texas Instruments. He also recommended two small-cap companies: Genesis Microchip*, the top supplier of components for liquid-crystal displays, and Amkor Technology*, the world's largest provider of packaging and test services for the semiconductor industry.
NationsBanc Montgomery Securities LLC, a subsidiary of BankAmericaCorp., is a full-service investment bank and brokerage firm. The company provides research, trading and issuance in the equity and fixed-income markets (high yield, emerging markets, high grade and mortgage-backed markets).
Other services include M&A advisory, financial buyer coverage, loan syndications, global investment banking, real estate finance, mortgage finance, money markets and a primary dealer.
NationsBanc Montgomery Securities is a registered broker-dealer with the Securities and Exchange Commission and is a member of the National Association of Securities Dealers and the New York Stock Exchange.
NationsBanc Montgomery Securities LLC currently maintains a market in this security. NationsBanc Montgomery Securities LLC was manager or co-manager of a public offering and/or has performed investment banking or other services for this company in the last three years.
SOURCE: NationsBanc Montgomery Securities LLC
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