Wednesday, October 19, 2005
Trends in the Semiconductor Equipment Business What are these numbers? (click image for larger version) These numbers are the three month averages of billings and bookings for North American Based Capital Equipment Companies as reported in SEMI's Express Report. It's no wonder the Front End stocks have been acting so punk. The trend in the TAP sector looks pretty good but one has to admit that the TAP segment has been through a period of severe under-investment. A solid bounce was in the cards. The question is, will quarterly guidance for a 5 to 10 percent increase in Front End bookings send the stocks higher? In an environment where device makers pursue "incremental capacity additions" you have to wonder if there is a driver for substantially higher equity values. Incremental improvements? Maybe. I am not expecting anything spectacular. Charts for Chart Watch are under construction. I will post them this afternoon.
Semiconductor R&D Spending Trends Yesterday SEMI hosted a webcast to present a whitepaper written by INFRASTRUCTURE afflilate Ron Leckie. The paper takes a hard look at the trends in R&D spending in the chip industry. Here is a chart that we will be talking about over the coming days (click on the image if you would like to see a larger version): Is there concern? You bet. Though many will not talk about it publicly, next to the water coolers inside chip, chip equipment and materials companies, one hears the "rest of the story." Frankly, I thought Ron covered the details of his findings nicely during the webcast. Unfortunately the discussion following his presentation danced around the major issues. Typical..... The full paper is available at the SEMI website. It is highly recommended reading for those investing in the sector. Carl
Wednesday, October 05, 2005
Upgrading to Interesting What can I say? For those that visit this site you know that I have not posted anything about the electronics, chip or chip equipment industry for a while. I downgraded it to boring on 6/25 - which really meant "no further comments necessary" - and left the party (if you want to call it that) to enjoy the summer. Of course, that's not really true. I've been involved with the semiconductor industry for so long that it is literally impossible to attempt short a term break. I could not get away - no matter how hard I tried. Went on the annual trek to Semicon West in July, participated in a couple of mid-season forecasting sessions, spent hours on the phone talking and e-mailing with people who run businesses embedded up and down the manufacturing food chain. Some of those talks were with people outside of the electronics industry. Read a lot, learned a ton..... Please don't misinterpret the title of this post as a recommendation to buy the stocks. I'll get into the why of that question later. We've held the stocks for a long time, riding out the little ups and downs of the last few years. It would be hard to grade the trading action as interesting. I know, I know. I downgraded to boring and right after that share prices jumped out of the range and, in a measured way, ran to higher ground. Fundamentally things did not change. The capital equipment industry is enjoying a seasonal blip in tool orders. The semiconductor makers have been in their production ramp for the holiday selling season. A number of technology issues are testing the process technology front (as always). The supply chain continues to be stressed. I could go on and say, higher energy prices, higher interest rates, housing bubbles, and all that other jazz were also visible back in June. They were and in time, I suspect, they will develop into more significant issues for the end demand front. Let's leave that alone for now.... What I mean to imply when I say, "Upgrading to Interesting" is that there are a lot of signs that things are about to change on the business strategy front. That strategy change does not mean we are going to see a spike or bust in semiconductor and semiconductor equipment bookings and shipments. Remember, a seasonal move in order patterns should be expected. Even if it is just a bounce off this year's lows. Even if it carries into early next year. We see it coming. It's here right now. That's all short term. The longer term changes I see have to do with the speed and aggressiveness of companies as they adjust their business models to the dynamics of a mature industry state. A few months ago I would have said that electronics industry executives are being dragged, kicking and screaming, toward some hard decisions. Not anymore. The light bulbs are on. Encouragingly, I found during my talks with industry people over the summer that more and more are embracing and adapting to this change. More than anytime in the past. Simply put, that's why this period is now so interesting. There is actual movement and the one's that are moving are going to become the winners. It's sad that it took so long. Some of this stuff we have been talking about at this site for years. At the same time, it's good that we are now moving forward. Blogs are being updated today. Stick around. Carl