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Lam Research – Uptick is Here – More to Come

Carl Johnson — Fri, 27 Jan 2012 01:51:17 +0000

While I try really hard to avoid the quarterly earnings brouhahas I think it is worth it to mention a few things about the report Lam Research released last night. Suffice to say, Lam beat expectations and guided the next quarter higher than expectations. We have been discussing amongst the INFRASTRUCTURE minions that beating is not necessarily enough to drive upside action in the stock — “It’s the ‘forward’ that really counts.”

A few days ago I sent a note that centered on the the drivers for increased business at Lam. The insertion of SADP (Self Aligned Double Patterning), hard metal mask schemes, the transitions to FinFets and the printing of 14nm features will develop in to revenue opportunities that extend in to 2013 and 2014.

Lam is predicting that Wafer Fab Equipment (WFE) spending will be $30 to $31 billion in 2012. This is a flattish year-over-year outlook but, I think it is worth mentioning that these numbers have been moving up (the momentum started to build in the first week of December) and they have the potential to shoot much higher. Notable are the larger than expected capital spending plans announced by Intel and Samsung. Sure, TSMC has announced that they will spend less than they did last year but I would not rule out the possibility of that moving higher as this year progresses. Of course, everyone has to issue a disclaimer so Lam (along with anyone else you can think of) noted the macroeconomic issues that will, no doubt, have an influence on how much is actually spent.

90% of Lam’s shipments in the December quarter went to customers producing devices with features less than or equal to 45nm. 46% of all the quarters’ shipments were to Foundries. This quarter Lam reclassified logic manufacturers that dedicate a significant portion of their production to foundry business to the Foundry segment (more than likely this means Samsung has been placed in the Foundry segment). >50% of the shipments expected to made in the March quarter are headed to the Foundry segment.

In the coming months Lam will be providing an update on the Novellus acquisition. They expect the transaction to close in June. Most of you know that this is a perfect fit. Etch and Single Wafer Clean are offered by Lam while Novellus brings the adjacent steps of thin film deposition and wafer surface preparation. One would expect significant leverage as the combined entities develop advanced processes for 300mm and, ultimately, tools for the 450mm transition.

There have been a number of post-EPS sell-offs in tech stocks so far this year. If the shares of Lam were to dip toward $40 I’d suggest stepping up to the plate to pick some up. It’s pretty clear that good things are happening.

Much more to come…. Don’t touch that dial!

The Internet: Can’t Live Without It

Carl Johnson — Wed, 02 Nov 2011 21:37:32 +0000

Today Cisco released the results of their second Connected World Technology Report. 1,441 College Students, ages 18 to 24, and 1,412 Employees, ages 21 to 29 participated in the survey. The results, as you may expect, are similar to what was revealed in last years release.

To this group, the Internet is a must-have. To some, particularly those located in India, China, Germany and Japan, Internet access is more important than owning transportation. A little over one-third (32%) of College Students indicate the Internet is as important to them as water, food, air and shelter. 40% of all college students consider Internet access more important than dating and social activities. Over 50% of both groups said they could not live without Internet access.

Seriously?? Can’t live without it?

Okay, aside from the over-the-top answers like, “can’t live without it”, it’s worth it to download the reports and review the information. I have yet to get through it all but there were a few things that caught my eye.

Being someone that follows the chip industry I will admit to cracking a smile when I saw that 45% of the College Students and 36% of the Employees said laptop computers are the primary tool they use to get information and news. As much as we like to talk about mobile phones and the growth they are enjoying, in China 2/3rds, or 67%, of their College Students were using laptops to get their Internet content.

(Hey! I thought the PC was dead?)

Smartphones are important. They were as used as the primary device for finding information and news by 10% of the College Students and 11% of the Employees. In Spain, 36% of the College Students were using a smartphone as the primary way to get information. In Australia, 1 in 4 Employees were using a a smartphone as their primary gathering tool.

The type of hardware used tends to vary quite a bit when looked at on a regional basis but one over-riding theme is very clear, no matter what the device is, College Students and Employees would like to be able to choose what they use to access networks anywhere, anytime.

If you are interested in these trends there’s much more in the report.

Thailand Floods Take Toll on PC Makers

Carl Johnson — Mon, 31 Oct 2011 23:13:45 +0000

Following up on last week’s post about the impact the Thai floods are having on the HD market, EE Times serves up this piece:

Thailand floods take toll on PC makers.

A quote from iSupply:

“Beyond Thailand itself, the worst-impacted country is Japan, which maintains extensive manufacturing operations in areas affected by the disaster,” said iSuppli in a statement.

“Overall, the Thailand flooding represents the second major natural disaster to affect Japan this year, after the March earthquake. Thailand plays a key role in the manufacturing operations of Japanese companies, with an estimated 1,800 Japanese manufacturers operating in that country and 450 Japanese businesses located in seven flood-hit industrial parks,” the company added.

Here are some photos of what has happened in Japan six months after the tsunami:

Japan Marks Six Months Since Earthquake, Tsunami

You have to hand it to them for their resilience.

Second Energy Department-backed Company Goes Bankrupt

Carl Johnson — Mon, 31 Oct 2011 21:46:40 +0000

In another showing of brilliant due diligence a second alt+energy company, funded with your tax dollars, bites the dust:

Second Energy Department-backed company goes bankrupt – The Hill’s E2-Wire.

Beacon Power Corp., which develops energy storage systems, filed for bankruptcy protection in the U.S. Bankruptcy Court in Delaware.

Beacon Power had received a federal loan guarantee to help build an energy storage plant in Stephentown, N.Y., that began operating in January. The Treasury Department’s Federal Financing Bank provided the loan.

Beacon sought bankruptcy protection two days after the White House ordered an independent 60-day evaluation of the Energy Department’s loan programs aimed at ensuring effective management and monitoring.

The review, conducted by a former Treasury Department official, will include examination of how Beacon’s project is performing going forward, and whether there are additional steps that can be taken to protect taxpayers, according to the Obama administration.

Beacon is a publicly traded company. At one time, early in this century, the shares fetched over $90. The company has never made any money. Grab a stiff drink and check out the Beacon website if you would like to run through their annual financial performance. ahem

Business Week and Bloomberg have even more on the story:

Beacon Power, Backed by US Guarantee, Files for Bankruptcy

Beacon plunged 33 cents, or 73 percent, to 12 cents at 2:23 p.m. New York time in Nasdaq trading, after dropping as much as 76 percent. Before today, the shares had declined 80 percent this year, prompting Nasdaq to warn Beacon that its stock might be delisted because the price had fallen below the $1 minimum.

The stock closed today’s trading session at $0.11 per share – well on its way to doughnut land.

This is far from the end. I fear we will be hearing about a lot of troubles with these alt+energy loans.

Leading Econ Bloggers 3rd Quarter Outlook 2011

Carl Johnson — Mon, 31 Oct 2011 21:40:38 +0000

Years ago a press release like this would have been the perfect contrary indicator. Leading economic bloggers are pessimistic on the economy:

Kauffman Economic Outlook: A Quarterly Survey of Leading Economic Bloggers, Third Quarter 2011.

Optimism is out; pessimism is in among the country’s top economics bloggers as they look to 2012 and beyond, particularly regarding jobs. A new Ewing Marion Kauffman Foundation survey released today shows that only 50 percent of respondents anticipate employment growth, a decrease of 20 percent from second quarter.

Fully 95 percent of respondents view current economic conditions as “mixed” or “facing recession,” an increase of 10 percent from second quarter, and a third predict a double-dip recession during 2012. “Uncertain” is once again the top adjective economics bloggers use to describe the economy, and respondents shared expectations of higher annual deficits and the top marginal tax rate.

From Slide 11 of the Full Survey:

In every category of business, conditions right now are rated as “fair, bad, or very bad” by more than 69 percent of respondents, with venture and angel capital being the least bad of them all at only 69 percent, while bank lending to individuals is rated 90 percent negative.

Well, one thing is for sure, they don’t call it the “dismal science” for nothing.

Wait a second – perhaps stuff like this is still a good contrarian play? After all, the stock market, as measured by the Wilshire 5000, just had its biggest up month in 24 years.

Inside WD’s Flooded Thai Factory

Carl Johnson — Fri, 28 Oct 2011 21:45:19 +0000

Earlier today Samsung and Acer noted the impact the Thai floods will have on their business. Here are some pictures from inside Western Digital’s Thai Factory:

Inside WD’s flooded Thai factory • Channel Register.

I sent this to a few of my friends in the industry. One industry exec had this to say:

It turns out that Bang Pa in facility was submerged with 2 meters of water. This is the old Read- Write facility and I have been in it many times. The first floor is where most of the slider processing equipment was located. Most of the equipment was lost to the flood. They last saws, grinders, sorters, cleaners, steppers, alignment tool etc. It’s a real mess. This situation for WD is pretty bad because they had all their slider fabrication in one basket. It will take at least 4 months to start the recovery and a year to get back to where they were pre-flood. It looks like the high water will not recede for at least 3 weeks.

The issue that is affecting all the drive companies has to do with the supply chain. Hutchinson, Magnecomp, Nidec, On Semiconductor, MicroSemi. All facilities are in similar industrial parks that have been flooded or closed by the flood.

Two Fabrinet facilities are down hard. These two facilities make a large percentatage of optical devices for JDS Uniphase, OCLARO, Finisar and Emcore. On Semi’s fab for power and signal management, logic, discrete and custom devices has also taken a hit.

In a follow-up conversation we talked about the equipment and how it would take a long time to replace – perhaps as long as 6 months. One of the reasons for this is that low capital investment rates in disk drive manufacturing pushed many of the companies supplying tools to the manufacturers to down-size or, worse yet, leave the industry. It’s not going to be easy for WD to ramp back up.

This story is bound to get more coverage in the coming weeks because it is going to have a significant impact on a host of companies

Tech to Super Committee: Seize The Opportunity to Spur Innovation!

Carl Johnson — Fri, 28 Oct 2011 20:31:06 +0000

Are they listening? They better be. Folks are lining up at the door. This release came out yesterday:

Tech Industry Urges Congressional Supercommittee to Seize Opportunity to Spur Innovation as Key

Six of America’s leading technology trade organizations and their members urged the bipartisan Joint Committee on Deficit Reduction to embrace a series of proposals that would help America’s economy and debt stabilization by supporting innovation. The recommendations were part of a letter sent to the Joint Committee today sponsored by TechNet, Business Software Alliance, Consumer Electronics Association, Information Technology Industry Council, Silicon Valley Leadership Group and TechAmerica. The letter included recommendations on tax reform, research and development, spectrum, smart deployment of information technology to reduce waste, high-skilled immigration reform, deployment, among others.

The letter was signed by 50 prominent members of the tech community. Here’s the gist of their message:

We write as American business leaders concerned by the direction, substance, and tone of our nation’s policies and politics. We are hopeful that your work will help the nation emerge from this period of economic uncertainty stronger, more competitive, and with a clear window of prosperity for all Americans.

As leaders within companies that collectively employ millions of Americans and operate and compete around the globe, we know this country can do better. Thus we offer below our ideas for (a) addressing the nation’s structural challenges in a fashion that will stimulate growth and job creation and (b) stabilizing the U.S. debt:

Create Jobs and Ensure U.S. Competitiveness — Tax Reform

First and foremost, America’s corporate tax system is globally uncompetitive and is woefully out of step with the world in which we currently live. Many of the companies that are signatories to this letter and the innovations that drive their businesses simply did not exist when the code was last revised in 1986. While the code has remained largely static over time (with piecemeal patches), the environment in which our companies operate has changed dramatically.

To attract – rather than lock out – capital and create jobs here at home, we must act in our short- and long-term interest. With regard to the first, we should take immediate steps to encourage U.S. businesses to repatriate the approximate $1 trillion in accumulated foreign earnings that are locked outside of our country because of an antiquated and punitive tax code. As a nation, we are much better off with those dollars being invested here rather than elsewhere.

In the long term, we must reduce the rate, simplify the code, and strengthen incentives for job-creating activities such as R&D, and transition to a competitive territorial tax system.

Globally, in just the past four years, most of the major markets with which we compete have reduced corporate tax rates and transitioned to a competitive territorial tax system. In fact, our largest trading partners—Canada, Great Britain, and Japan—have all done so to become more competitive. Further, this exact approach to tax reform has been urged by many who have closely studied the issue including the National Commission on Fiscal Responsibility and Reform, and the “Gang of Six” U.S. Senators who proposed a solution to the debt ceiling crisis this summer.

Stimulate Growth – -Targeted Investments

Second, there are other important steps that the select committee can take to stimulate growth, including making targeted investments. Not every dollar spent has the same effect on the economy. Thus, we recommend reducing or eliminating low-impact spending in order to create the fiscal space to focus on pro-growth investments. Within our companies we continue to invest in research and development even in tough times because that investment provides a rate of return that is a multiple of the expenditure. It is important that our government does the same. Thus, we recommend greater investments in those activities with clear economic benefits because of their transformative potential. Programs that support basic scientific research, improve our infrastructure, protect our intellectual property and create a 21st century workforce are smart investments.

Chipmakers Invest Big in NY

Carl Johnson — Tue, 27 Sep 2011 18:20:58 +0000

Kick-starting the 450mm transition and collaborating to improve the 300mm regime, the state of New York signs 5 industry heavyweights to put some big skin on the table ($4.4 billion to start). Intel is going as far to relocate their 450mm development facility to the area. Other participants include IBM, Samsung, Global Foundries and TSMC.

Governor Cuomo Announces $4.4 Billion Investment by International Technology Group Led by Intel and IBM to Develop Next Generation Computer Chip Technology in New York.

This will cause meetings…..

Solyndra: FBI Agents Executing Search Warrant

Carl Johnson — Thu, 08 Sep 2011 16:56:50 +0000

FBI agents executing search warrant at Solyndra – San Jose Mercury News.

Solyndra spokesman Dave Miller said the search came as a surprise, but he emphasized the company is “fully cooperating” with federal officials. He said he did not know the purpose of the search, but he speculated it could have something to do with the $535 million in loan guarantees the Department of Energy awarded to Solyndra.

It could have something to do with the $535 million? You think?

Uncle Sam… Trying to save face.

Embracing Trial and Error Within Complex Systems

Carl Johnson — Sat, 03 Sep 2011 19:41:58 +0000

As a Research Fellow with Coburn Ventures I am privileged to receive their periodic missives. The group covers a lot of ground and their grasp of the “changes” in the technology world are always insightful and compelling. Between portfolio strategy and coverage of individual companies members also contribute book reviews and thought pieces. These are lucid, clearly written articles that spawn a lot of discussion.

Earlier this week Coburn Analyst Brynne Thompson penned her take-aways from a TED presentation by Tim Harford. Tim’s presentation discussed the need to embrace trial and error when working in complex systems. Brynne extends the subject matter to investing (there’s plenty of complexity to deal with in that arena!), highlights some of the main points of the talk and then provides a neat summary of how she plans to apply it to her work.

The first part of this is a lead-in from Pip Coburn – the main man at Coburn Ventures. His comments are always worth a read:

What follows is a note from Brynne through our friend Julien. Thank you Julien.

I am immediately reminded of a time long ago when at Lynch+Mayer the MOMENT of “taking a position” was a VERY VERY big deal that implied you had figured it out, had crossed ALL your t’s and dotted ALL your I’s… 15 years later I realize that I am rarely if ever in my LIFE (of which my work is a critical subset)at a point of all t’s crossed and “all” my work is done AND even more so I seem to see that when I am deluded to consider that I have ALL “set” that a rude awakening is juuuuust around the corner.

Somewhere in 1996 I had a realization in doing tech – which was far more immature and far far far far far more volatile than today for others who lived it — that when I scanned my portfolio of investments during my regular checks and thought, “No, that one is good… No need to make a follow up check,” that I had somehow alerted the Gods that I didn’t know my humanness and that I was due for a painful lesson… Sure enough an earnings pre-announcement would spring. (This was BEFORE the days of what I think my friend Arnie Berman dubbed as “earnings pre announcement season” – which has stuck.)

So… EVERYTHING we do today I consider work-in-process… I am today reviewing half of our short pre determined game plans to consider with Dave and Brynne especially what we might be missing…

And I love the work I get to do…

Thanks Brynne for this note… It is well-timed for me

…Pip

And here is Brynne’s note:

Subject: **Tim Harford at TED (video from Julien): The take away for me and my investing: