Why did MEMC spike this week? New solar financing, analyst upgrades...and just maybe, hiring one of the industry's top Wall Street watchers. Also: Why strong third-quarter results can't hide the building stormclouds in memory and PCs. And what TI is planning next with its expanded 300mm capacity means a few sector players should batten down the hatches.
MEMC feted for funding, ferrets finance figure
MEMC gained about 14% over the week, partly thanks to a $60M financing commitment to its SunEdison business from JP Morgan, and subsequent brighter outlooks from Wall Street. Just maybe, though, investors know a smart personnel move when they see one -- such as hiring Deutsche Bank's Steve O'Rourke to steer its bizdev and investments. He's been one of the best Wall Street watchers for both semicap and solar, and we wish him all best.
Sunny before the WFE storm?
Speaking of Deutsche Bank, analyst Peter Kim took a hatchet to a number of top names (LRCX, NVLS, and KLAC downgraded to "Sell," VSEA down to "Hold," and AMAT maintained at Hold). Tea leaves for 3Q10 suggest solid results for most everyone, and more foundry spending is anticipated -- but Kim sees ominous bad juju in slumping (-≥20%) memory contract prices, which suggests oversupply that could dent equipment bookings, and ongoing sluggishness in PCs, with pre-3Q negativity radiating from key chipmakers Intel, AMD, and others. "While we don't expect leading chipmakers and top CapEx spenders to completely cut off spending, spending will slow meaningfully from the torrid 3Q pace as capacity outpaces end-market demand," he writes.
Credit Suisse's Satya Kumar, though, thinks KLIC's negativity not only was "not a surprise at all" given the gulf between Cu wirebond capacity and demand, but it also doesn't reflect on broader front-end business. "The trends for back-end and front-end are very different this cycle," he writes. "Back-end test is being driven mostly by analog IDM capex, a segment that thrives on buying used front-end equipment [...] Front end capex is being driven by the traditional NAND/DRAM/Foundry segments. The overlap is simply not as significant as it normally is."
TI's next plan for 300mm muscle
Credit Suisse's John Pitzer sees Texas Instruments flexing its new beefier 300mm muscles by expanding into lower-tier segments such as power management & MOSFETS and analog ASSPs more quickly than anticipated -- and that should sound the alarm for companies like Fairchild Semiconductor (69% exposure to such markets), On Semi (46%), and Intersil (45%). All that new $3.5B worth of 300mm capacity not only boosts margins -- but it could also give TI some flexibility to drive share through pricing or target those segments where GMs are quite a bit lower, he writes.