Q1 Performance Table

A quick review of first quarter performance for a few chip, chip equipment, subcontract and EDA issues is in order (prices in the table do not include action during the last two trading sessions):

Company                 Symbol       '05 close     Q1 '06 close 

Intel                    INTC          $24.98        $19.46   
Texas Instruments        TXN           $32.07        $32.47   
Micron                   MU            $13.31        $14.72
Advanced Micro Devices   AMD           $30.60        $33.16   
STMicroelectronics       STM           $18.00        $18.39           
TSMC                     TSM           $ 8.09        $10.06
Analog Devices           ADI           $35.87        $38.29
Maxim                    MXIM          $36.24        $37.15

Applied Materials        AMAT          $18.49        $17.51
KLA-Tencor               KLAC          $49.33        $48.36
ASML                     ASML          $20.08        $20.37
Lam Research             LRCX          $35.68        $43.00
Novellus                 NVLS          $24.12        $24.00
Varian Semiconductor     VSEA          $29.29        $28.08
Semitool                 SMTL          $10.88        $11.37
Ultratech                UTEK          $16.42        $24.48

Cymer                    CYMI          $35.51        $45.44
Photronics               PLAB          $15.06        $18.76

Brooks Automation        BRKS          $12.57        $14.24
Asyst                    ASYT          $ 6.16        $10.41
Entegris                 ENTG          $ 9.42        $10.64
MKS Instruments          MKSI          $17.89        $23.43
Advanced Energy          AEIS          $11.83        $14.13

ATMI                     ATMI          $27.97        $30.20

Advantest                ATE           $25.38        $29.37
Teradyne                 TER           $14.57        $15.51
Kulicke & Soffa          KLIC          $ 8.84        $ 9.54
Cohu                     COHU          $22.87        $21.22 

Amkor                    AMKR          $ 5.55        $ 8.64
ASE                      ASX           $ 4.49        $ 4.66

Cadence                  CDNS          $16.92        $18.49
Synopsys                 SNPS          $20.06        $22.35

Yes, this is follow-up to a post detailing last year's performance for the same group of stocks: http://www.infras.com/2006/01/are-those-bull-snorts.html Notice any patterns here? AMD and Intel have swapped places. Intel is fumbling around right now - this quarter is not looking very good. Micron is moving higher most likely because of the changes in strategy - more Flash production (through the relationship with Intel) and their bid for Lexar. Expectations that more DRAM demand will develop when Vista rolls out is also keeping investors interested. TI held steady this quarter - strength in analog and cell phones is driving their business. STMicrolectronics, Maxim and Analog Devices were up ever so slightly - the latter two being driven by strength in the analog business. Only Lam and Ultratech gained significantly out of the capital equipment group. Obviously investors do not believe the good business environment will hold together . The *forward looking* view fits right along with the "Faint Echo" post I made on January 20: http://www.infras.com/2006/01/faint-echo.html Seasonal shipment and ordering patterns are still in play. Lithography players, Cymer and Photronics, did very well. Photronics is being pushed by high levels of design activity while Cymer is *the* company in DUV immersion lithography. How many slots are out there for these very expensive immersion scanners? Not enough. Estimates seem high so the bet here is that the stock pulls back over the next quarter. Good moves were made by the subsystem component suppliers. Is there much more upside? Asyst was downgraded today. The concern here is that we are near the seaasonal peak. If front end equipment bookings start to weaken these stocks will likely give up some of their gains. Materials are still a hot area and a favorite. ATMI was volatile during the month and MEMC (not listed) is moving strongly higher. MEMC is being driven by increased polysilicon demand (for solar) and tight wafer supplies. With ATMI, the number of new materials that are being integrated into sub 90nm processes continues to grow. That's the good news. The bad news is that it is becoming more and more difficult to integrate these with the manufacturing process. Lots of debate here. Those that run leading edge fabs will tell you that new material integration is moving right along. If you ask the equipment vendors and the materials companies (including the chemical and gas analytical labs), they will tell you it is chaos out there. Lots and lots of issues. Test, Assembly and Packaging issues performed nicely. Advanced packaging and the challenge of testing devices with multiple levels of functionality is driving this arena. There are also capacity shortages that need to be addressed. One issue here is the cost of test - it's going up and up and up. Business at the subcontract houses, Amkor and ASE, is being driven by the explosion in IC unit volumes. There's a question about this though: Can they generate enough earnings to push the stocks higher? Margins are an issue. I'm also watching out for the dreaded inventory build. My ear is to the ground on this one.... EDA houses (Synopsys and Cadence) are looking good. I like them as long term plays. ------------- Can I tell you where the stocks will go over the next few quarters? Not exactly. I can tell you that seasonality in shipments and orders will definitely impact investor behavior. If the script plays out as it has in the past one should expect business activity to slow down. Typically the slowdown starts in the middle month of 2nd quarter and extends all the way to end of the 3rd quarter. Other issues: "Selling in April and buying back in October" is something a number of tech strategists are talking about. With the Vista delay and Intel's new product line-up being rolling out at the end of the year this tactic definitely has some merit. Then there's the impact of options expensing - a negative, of course. Message here is to keep your guard up. Don't be afraid to book profits.