Thursday, February 25, 2010

Intel and TSM - fizzling

One full year from the original announcement Jim McGregor from InStat offers this: "Intel, by some accounts, is guilty of its own success," McGregor said. "No matter what, they are skewed as the 800-pound gorilla when they enter a new market."

A bit of a linkfest here - very much noteworthy:

A Tie up between Intel and TSMC Fizzles

And one more link from EE Times on the same story....

Fascinating…. No matter how hard they try, they just can’t seem t break from the PC-centric mold.

Somewhat related, Global Foundries cuts a deal with ARM – which, based on what I hear, means they landed 150 new customers.

Thoughts on this are more than welcome……

Saturday, February 20, 2010

Applied Materials Earnings - Some like it, some don't..

Under-estimations abound!    After reading several Wall Street analyst reports it is clear that some view the outlook as much more bullish than others.  Two of the reports we've  read, one from UBS and one from Goldman Sachs, are quite positive.   Less favorable views can be found on the EE Times website:   Applied posts big quarter, but analysts worry

Overall, Applied’s report was not too bad – particularly when one allows for the fact that it takes a ton of business to move the earnings needle.   Now, the stock is acting poorly on the heels of this report and I will go on the record and say that if you are looking to purchase shares of a WFE company,  it might be better to focus on Lam, Novellus, Varian, ASML, KLA-Tencor and perhaps even little ol’ Mattson (who appears to be gaining some market share in Etch but at the same time is having a problem procuring components).   Along with that I would say some of the ATE houses warrant a view – Teradyne and LTX-Credence are two I personally prefer.

One question that many folks are pondering is whether or not the supply chain is capable of supporting the demand panic that is currently taking place.  Over and over we hear that component suppliers are strained and lead times are stretching out.    Much of this is due to the attrition, er, decimation, that has taken place in the supply chain over the last seven years.

Innumerable companies have been leaving the semi supply chain - either voluntarily or, simply going out of business.   Clearly this has an impact on the ability to ramp tool output.    In a roundabout way, this was noted on the AMAT conference call:

Question:   Wenge Yang – Oppenheimer

Hi, this is Wenge for Gary. You commented on supply chain constraints and combined with your recent hiring of executive supply chain management. I want to get your opinion on what kind of impact of the supply chain constrained on your costs and operating expenses in terms of overtimes, a higher cost of goods, and also the lead time strategy.

Answer:   George Davis – AMAT EVP and CFO

Sure. The major impact that we had from the supply chain difficulty this quarter was seen in higher expediting costs and really the costs of logistics in general were above normal and we are seeing improvements in the supply chain in the second quarter. I think we still have a little bit or work – workout to do, but the – there is no connection really between our decision to hire an external party and the challenges we are having here. As you know, we are going to be building up our capability in Singapore to strengthen our Pan-Asia supply chain and really the recent hire is in connection with that activity.


Ahh…   “higher expediting costs”…..   We’ve been discussing this on the subscriber/advisory mailing list.   To put it mildly, the semi-capital equipment food chain is, once again, in a phase where customers are saying,  “We don’t care what it costs, we need it yesterday.” The mere fact that Applied is paying expedite fees speaks volumes.  We’ve seen it so many times - those crazy cyclic spikes in business activity.

Some things never change….

Book To Bill Report

Thursday evening SEMI released bookings and billings for North American based semiconductor capital equipment suppliers.   It’s a lagging indicator but I think it is still worth noting…..  The full press release from SEMI follows the break.

The three month moving average of bookings has now crossed the $1 billion mark – and in the coming months it looks like it will go even higher.   Billings are currently a shade below that mark but should get there next month.   Visibility is improving and lead times are stretching out which implies that this cycle will  last longer than many anticipate.

Somewhat related, distributors for consumables and equipment components are openly talking about shortages.  Obviously the carnage that took place in the supply chain has folks scrambling.

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Monday, February 08, 2010

Piper Says Buy the Semis

Piper Jaffray semiconductor analyst Gus Richard makes some very valid points in his call to buy the semiconductor group.   I do think there is a trade here because the semi-stocks have come down so far.   Cross your fingers, knock on wood….   It’s another call on the market.

Your mileage will definitely vary (consider this a disclaimer of sorts).

The comments in the same report about Cisco's recent earnings release are very interesting.   I think one of the areas of concern with Cisco's report came to light when a few folks, folks that actually read quarterly filings, made note of the fact that they were providing some very cheap financing to some of their customers.   We’ll see how that works for them……  Suffice to say, history shows it hasn’t done well for others.

I don’t have a problem with the idea that we are on the brink, or in the midst, of a major electronics upgrade cycle.  Whether this cycle is driven by PCs, which I will broadly place in any form - game boxes, e-books, smartphones, etc, etc -  it is clear to me that we are taxing the telecosm and the attendant systems to the nth degree.   Basic things, like the delivery of electric power, are under duress.

Fact is, we have been under-investing for too long.

With the real “Infrastructure” situation I’ve been experiencing that degradation and lack of maintenance first hand.   The utility services here in the Dallas Metroplex, which I now choose to call, Baghdad, Texas, are absolutely horrible.    Sure, like everyone else we had major storms last week and one can almost justify three days with no power but this is not just a one-off occurrence.    Outages almost every other week are taking place!   It’s unreal.

Why is this happening?  Check these comments out from a few weeks ago:

Now, I knew there was a problem way back when I was living here full-time but I get the sense that it would be wise to go back and evaluate the situation one more time.   I am sure I have not given enough consideration to the politics and the cut-backs in this arena.   In the past, the things that have kept me on pins and needles is the deleterious effects to the stability of the grid that is sure to come about by radical changes and additions to its base Infrastructure as a result of “accelerated” spending on some parts of its “smart-grid” areas, compounded by the renewables that are coming online which will stress existing transmission lines in new and previously untested ways.   Add to this, the fact that transmission lines are not expanding in capacity half as fast, much less being built to where they are actually needed to meet expanded geographies and the requirements for the new loads (all that good stuff we love) due to NIMBY (not-in-my-back-yard) issues, and it becomes very, very clear we facing some major infrastructure challenges.

At the very same moment one read about campaigns that make you feel as though things are improving.   For example, here’s a PR about making the communications world more energy efficient:!ut/p/kcxml/04_Sj9SPykssy0xPLMnMz0vM0Y_QjzKLd4x3tXDUL8h2VAQAURh_Yw!!?LMSG_CABINET=Docs_and_Resource_Ctr&LMSG_CONTENT_FILE=News_Releases_2010/News_Article_001908.xml

Alas, almost every piece of marketecture that I've seen coming from a major box vendor looking to save the Earth from itself has included some new box or an application, e.g., power over Ethernet, that burns additional energy while monitoring and controlling the power being used by other useless boxes designed to run on an architecture borne of some foregone, god-forsaken, copper-ridden era.  Translation, these solutions are the epitomization of setting the fox loose in the hen house.  Maybe AlaLu's solutions are different, we don't know yet.  If they are, however, they'll be the first major vendor to have fooled me on this score.

<big sigh>

When it gets right down to brass tacks I hope Gus and his bullish views are right.   One might as well enjoy today’s upward bias in business and hope for the best longer term.   It certainly beats a path in the other direction.

If you have an interest in reading the full report, drop me a note and I will mail it to your attention.