More Good News for Chip Cap-Ex, This Year (AMAT, KLAC, LRCX, NVLS)

It is not often that you see industry predictions for a virtual doubling in spending, but that is what Gartner Research is forecasting for semiconductor capital equipment in 2010.  If Gartner is correct, it could benefit Applied Materials Inc. (NASDAQ: AMAT), KLA-Tencor Corporation (NASDAQ: KLAC), Lam Research Corporation (NASDAQ: LRCX), Novellus Systems, Inc. (NASDAQ: NVLS) and others.  Keep in mind that these growth rates are due to easy comparisons and are not expected to last.

Gartner called the significant declines in 2009 to allow what will be more than double in 2010 cap-ex spending from semiconductor companies worldwide.  The new prediction is more than 100% growth to more than $35.4 billion in cap-ex for 2010 versus only about $16.6 billion in 2009.

It was just in April that the tone was set when Gartner said growth would be “excellent” and the market appears to have held up from corporate outlooks.  Most chip equipment companies have given guidance that is strong but not excessively above estimates.

There is a flip side to this though.  The gains in 2010 are snap-back gains and what would be referred to by economists as pent-up demand.  The estimate today for 2011 growth is only 6.6% as the growth rates will slow significantly.  Gartner is looking for mixed growth in 2012 and a drop across the board in 2013.

So, you end up with a glass overflowing in 2010 and one that is half empty for the year ahead.  The question of how this will impact the chip equipment players later in this year with guidance out into 2011 will likely be one of more specific winners rather than a whole sector of so much business sloshing around for everyone.

After the market open, Applied Materials is up 1.8% at $12.41, KLA-Tencor is up 2.3% at $28.73, Novellus is up 4% at $25.66, and Lam Research is up 3.4% at $38.34.

JON C. OGG