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Are chipmakers in the mood to buy equipment?

Posted: 15 Jul 2008 ?? ?Print Version ?Bookmark and Share

Keywords:IC? chipset? silicon? semiconductor? wafer?

Fab-tool capital spending is down, but not out. So, which chipmaker will buy IC-equipment in the near future and who will slam the door on vendors' faces?

Gartner Inc. recently lowered its capital-spending forecast, but the firm sees a recovery in 2009. Others agreed and are giving vendors some hope at this week's Semicon West Trade Show in San Francisco.

''We expect a cautious tone at this year's trade show because of the challenging business environment, as our checks suggest Q3 08 orders will flat to down 10 percent. We believe Q3 08 revenue will decline 5 percent to 10 percent sequentially and Q4 08 growth will be in low-single-digits, worse than consensus' view,'' said Edwin Mok, analyst, Needham & Co. LLC, in a report.

''However, we continue to believe that bookings will improve in Q4 08 pointing to higher revenues in 1H 09,'' he added.

In the report, Mok cited which chipmaker is expected to buy fab gear and who will ignore sales calls from vendors.

Shelling out for fab gear
"Big chip houses such as Samsung, Intel Corp., and Toshiba will remain committed to their plans in 2H 08,'' he said. ''While TSMC will spend less in capex in 2H 08, we see higher spending in 2009. We are also seeing increased shipments to Chartered in 2H 08,'' he added.

Delaying purchase
"In the memory houses, Nanya Technology Corp. and Meiya Corp. will delay tool ordering until Q4 08 (later than expected), and Rexchip R2 will be booked in Q4 08 (as expected),'' he said. ''We also expect Hynix and IM Flash Technologies to resume tool ordering in 1H 09,'' he added.

''We believe upside to foundry capex could come from Advanced Micron Devices Inc. (AMD) if it decides to aggressively outsource production,'' he noted.

Overall, it's a mixed bag for fab-tool vendors. Novellus Systems Inc. kicked-off recently the earnings season and Semicon West with the Q2 08 earnings report and an analyst meeting.

''We expect the company to meet consensus estimates for Q2 08; however, we see downside risk to 2H 08 revenue estimates based on our near-term cautious outlook on the group,'' Mok said. ''We expect Q2 08 bookings to meet the midpoint of guidance of down 10 percent to 25 percent quarter-over-quarter. We see some upside from foundry bookings (Chartered) offset by weaker then expected memory (Samsung).''

Anticipated cuts
''Another round of estimate cuts (from 5 percent to 10 percent) are coming for some,'' said Raj Seth, analyst, SG Cowen Securities. ''We've moved our overly ambitious Lam estimates in-line and taken our KLA-Tencor estimates below consensus,'' he added.

Next week, there will be a flood of earnings reports, including one from Intel. ''Street consensus estimates are at $9.32 billion (minus 4 percent quarter-over-quarter) and $0.25,'' said Avi Cohen, head of research, Avian Securities.

''Given what we believe to be a continuing solid environment for processors coupled with benign competition from AMD, we think Intel will report in-line with the Street, which should be viewed positively in light of what's been happening in the semiconductor space lately as many consider Intel to be a bellwether for technology,'' he said. ''One clear area of concern is its exposure to the weak NAND market, but we believe the available risks already priced in and well understood by investors," he added.

"The memory market remains soft. Spot pricing for DRAM continued to weaken over the past week in the low-single digit range with NAND remaining volatile with both SLC and MLC weakening as well after showing some stability the week before,'' Cohen said. ''Early feedback from our contacts regarding contracts for 1H of July suggests that DRAM will likely be flattish and NAND likely flat to down,'' he added.

Shipment targets
"It's also a mixed bag among the foundries. Our recent foundry checks indicate that most foundries, excluding United Microelectronics Corp. (UMC), will meet expected Q2 wafer shipment, with Q 3 wafer shipment forecasts currently expected to increase by 5 percent to 10 percent quarter-over-quarter,'' according to a report from Friedman, Billings, Ramsey Group Inc. (FBR).

TSMC's Q2 wafer shipment exceeded our prior expectations. FBR said although Q3 customers' order forecasts have recently been revised down, Q3 shipment or revenue is still expected to increase quarter-over-quarter.

For UMC, the report said, checks suggest that Q2 08 wafer shipment grew by 12 percent quarter-over-quarter, slower than expectations of 13 percent to 14 percent growth, but still higher than the company's official guidance of up 10 percent.

''Additionally, similar to Taiwan Semiconductor Manufacturing Co. Ltd, our checks indicate that Q3 wafer shipment has already been adjusted down and is now expected to be up only 5 percent, lower than past expectation of up 5 percent 10 percent," the report noted.

- Mark LaPedus
EE Times

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