Conflicting Signals on Semi Equipment Orders

By William Trent, CFA of Stock Market Beat

Trade group Semiconductor Equipment and Materials International (SEMI) is expecting stong equipment orders from memory makers this year, according to DigiTimes.

Investment on 12-inch fabs and memory production will be the two main growth drivers for fab spending in in 2007, and 85% of all fab spending will go toward equipping 12-inch fabs in 2007 according to SEMI.A total of about 23 million 8-inch equivalent wafers of new capacity is added in 2007, which represents an on-year growth about 16%, SEMI estimated. Samsung Electronics is the stand-out leading in terms of capacity, followed by Hynix Semiconductor, Taiwan Semiconductor Manufacturing Company (TSMC), Toshiba, Intel and Micron Technology, SEMI detailed.

Yet channel checks by Citigroup have suggested just the opposite, says Barron’s.

Samsung has pushed out some order for semiconductor back-end tool orders, according to Citigroup’s Timothy Arcuri. He says orders are being pushed out by about three months, and is likely to extend to front-end tools. “While we don’t know exact reasons for the pushout, we surmise ongoing memory price declines are too blame,” he writes.

As far as the likely order pattern, I’m with Citigroup on this one, as I was warning about pending overcapacity issues for the better part of the last year. The chart of memory prices is not the sort of pattern that inspires new investment. Now that it is happening, however, I’m looking for opportunities to buy on the news.

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This article is for entertainment purposes only and reflects the author’s opinion. It is not a solicitation or advice to buy or sell any securities mentioned. Always consult a qualified advisor before making investment decisions.

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