This week, industry watchers map out the semiconductor capex scene for 2010 and 2011, who's spending how much and where; why MEMC is seeing flatness, but not enough to derail the train; and another reason to be positive about the EDA sector.
Barclays' CJ Muse looked at semiconductor capex trends for 2010-2011, and fine-tunes "where we want investors to be" at the point of a stock price trough. His conclusion is a handful of downgrades: CYMI, KLAC, BRKS, and LTXC (all from "Overweight" to "Equal Weight"), VRGY from "Equal weight" to "Underweight," and a host of price target reductions (AMAT, NVLS, MKSI, AEIS, AMKR, FORM). He pegs a trough "sometime in 4Q10" for many shares, citing "continuing deterioration in semi data points (i.e. DRAM pricing, downward semi earnings revisions) and expectation of equipment orders peaking.
Muse also offers a mea culpa: "In hindsight, clearly the right call would have been to downgrade the group in April following the end of the Fed's quantitative easing, specter of increased government regulations, weakening picture in China -- basically everything that has pressured global end demand," he writes.
Credit Suisse's Satya Kumar still sees MEMC "outperform"-ing the field, but his stance is a little softer after some "industry checks" suggest flat semiconductor wafer ASPs in 4Q10 (vs. 3% expectation) and 1Q11, and "flattish" solar wafer ASPs in 4Q10 -- mostly attributed to production adjustments and excess wafering capacity at SUMCO. "We think longer term semi wafer supply/demand is fundamentally OK, and still believe in 2011 semi companies will increase wafer starts faster than the pace at which wafering companies add capacity," he writes in a research note.
DA Davidson's Thomas Diffely continues to be bullish on the EDA sector, this time singling out Cadence, which he sees improving revenues 11%-12% in 2011, mainly through recent acquisitions and transition to a new business model. "Based on recent comments made by several EDA management teams, and supported by data points coming out of the industry, we believe strength in the core EDA market continues to build," he writes. His current view also calls for some customer attrition over the next few years as contracts come up for renewal, "largely at the hands of Synopsys."
Top share-price growth this week goes to NVMI, on news of two multimillion-dollar orders for its standalone optical CD metrology tools in Asia, from a foundry and a memory maker. Meanwhile, investors saw National Semiconductor's disappointing revenue update as their cue to head for the exits.