In its 3Q10 results (Oct. 13), ASML forecasted 4Q10 bookings of about €1.3B. Eight weeks later it now sees as much as €2B coming in. (No details about 1Q11 numbers.) What happened? DRAM is weaker than expected, but NAND flash and especially foundry/logic new-fab commitments (55% of orders vs. 48% in 3Q) have far more than made up for it, the company says. Credit Suisse's Satya Kumar named names for likely culprits behind the increased demand: Samsung, TSMC, and GlobalFoundries for logic foundry, and IM Flash, Hynix, and Samsung in NAND flash.
None of those bookings include the company's EUV systems, of which six beta versions (NXE:3100s) are now on their way to customers. (Nine of the high-volume production version, NXE:3300, are slated to ship in 2012.) Those, he calculates, could translate into another €1B in incremental revenue, starting in late 2011 and throughout 2012.
While noting that order levels in 4Q are hard to sustain, Kumar sees several truths underpinning ASML's increased order demand, which is on track to end 2010 with a €3.4B backlog:
- Semiconductor product cycles and market penetrations are only expanding
- Capital intensity is only going up (memory as well as logic)
- Lithography capital intensity is *really* going up, with ASPs racing ahead of tool productivity
- ASML is gaining share vs. competitors (notably Nikon) in the next product cycle
- EUV is no contest at the moment: ASML is "3+ years ahead" of competing tool suppliers.
Look for order levels to trend back down to ~€1.5B in 2012, which will include EUV, but with lumpiness like we're seeing in 4Q, Kumar says.
Novellus brightens mid-4Q update
In its Dec. 7 midquarter update, Novellus nudged up its guidance for 4Q10 bookings (-5% to +10%, vs. -14% to -10%), shipments (13% Q/Q vs. 9%), and EPS ($0.88-$1.00 vs. $0.85-$1.00) noting that business has picked up since October, with a couple of big orders (for new capacity) potentially making that upswing. 4Q sales ($367M-$385M) and gross margins (49%-51%) remain unchanged (the divergence between improved shipments and flat sales being attributed to new products for new customers). Fab utilizations are above seasonal averages and overall memory is solid (stable NAND offsetting weak DRAM), while foundry activity remains strong. NVLS execs see no pushouts, but the midpoint of the 4Q bookings growth is slower than the previous estimate.
Bottom line, agree several industry watchers (Credit Suisse's Satya Kumar, Deutsche Bank's Peter Kim, Barclays' CJ Muse, Tradition Equities' Peter Wright): NVLS' generally positive outlook sounds an awful lot like other semiconductor capital equipment suppliers. Nothing surprising.