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| Outlook for Nanochip and Nanotech Capital Equipment Companies |
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Ed Wijaranakula, Ph.D.
Chief Investment Strategist, Infotix
Systems, Inc. - November 05, 2004
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Last month, Semiconductor Equipment and Materials International (SEMI) reported
September's book-to-bill ratio of 0.96, down from 1.1 in August.
The data represents bookings or orders of $1.36 billion in September,
with the billing of shipments coming in at $1.42
billion. The decline in the book-to-bill ratio is
attributed to weak demand in back-end equipment, including
those for wafer testing and packaging. Although the bookings of
front-end equipment from photolithography, etch, and diffusion to ion
implantation showed continued strength, Wall Street analysts believe that
excess capacity in
chip manufacturing is ahead.
This week, Banc of America
Securities analyst
Mark Fitzgerald cut his investment rating on
major semiconductor capital equipment makers, including Applied Materials Inc.
(NASDAQ:AMAT), KLA-Tencor Corp. (NASADQ:KLAC) and Lam Research Corp.
(NASDAQ:LRCX) from "neutral" to "sell", citing
a slowdown in demand attributed to a glut of chip inventory and liquid-crystal displays.
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Several quarters back, chip manufacturers were expanding their capacities and
ordering fab equipment in anticipation of strong demand in semiconductor sales
that did not materialize. A
combination of high yield from 300-mm wafers and
lower-than-expected demand, has forced chip manufacturers
to cut production and reduce capacity utilization.
Last week,
the Semiconductor Industry Association (SIA) issued a revised global sales forecast for semiconductor chips
next year from the growth of 4 percent to virtually
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flat. Although the DRAM
market could experience a steep decline in global sales
of 14.7 percent next year, microprocessor and digital signal
processor (DSP) markets may see some growth of 2.3 and
6.9 percent, respectively.
Despite the
not-so-bullish near-term outlooks from the SIA, SEMI and Wall
Street, we believe that long-term potential growth of
selective semiconductor capital equipment makers engaged in Nanotechnology is high. The
growth could be fueled by new investments in
nanochip fabs and commercialization of nanotech-based
products including consumer electronics, nano-sensors
and biomedical devices. Sterling,
VA-based market research firm NanoMarkets, LC., forecasts the worldwide revenues
for nanoelectronics to exceed $US 10 billion in
2007 and to reach $US 82 billion by 2011. The nanosensor market
alone could generate $US 446 million by 2007 and is expected to grow to
$US 5.6 billion by 2011.
Nanochip Fabs and Nano-Based Products in the Pipeline -
Chip manufacturers are trying to capture the cost
benefits of nanochips with device geometry below 100-nm,
by announcing plans to build new nanochip fabs or by converting their old existing fabs to nanochip
fabs. In August, South Korea's Samsung Electronics Co. announced
plans to develop its second 300-mm wafer nanochip fab for
the manufacturing its first 65-nm 8 GB NAND memory chip. Samsung's
first 300-mm fab in Hwaseong, South Korea, is currently
producing double data SDRAM chips
using the state-of-the-art 100-nm process.
Texas Instruments Inc. (NYSE:TXN)
announced last month that the company will begin building a $US 3 billion fab
(DMOS7) in Richardson, Texas, before the end of this
year, for the manufacturing of the 65-nm generation of communication and consumer electronics
chips. Advanced Micro Devices (NYSE:AMD),
which already has owned and operated wafer fabs in Dresden,
Germany since 1999, said early this month that it had broken ground on a new
$US 2.4 billion nanochip fab (Fab 36) in Dresden. The
new AMD fab is scheduled to manufacture its CPU using 65-nm and 45-nm
processes by 2006. According
to the New Tripoli, Pa-based research firm, the Information Network,
Shanghai, China-based Semiconductor Manufacturing International Corp.
could have three 300-mm 90-nm fabs built by 2006
to supply explosive domestic demand in IC chip
products. Shanghai, China-based Grace
Semiconductor Manufacturing Corp., the second largest Chinese
foundry, is now
converting a 200-mm to 300-mm 90-nm fab and is planning
to break
ground on a new 300-mm nanochip plant next year.
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About the Author: Dr. Ed Wijaranakula is presently the
Chief Investment Strategist at Infotix Systems, Inc. Prior to Infotix Systems, he has worked with
Intel, Hewlett-Packard, Micron, Motorola and Texas Instruments and has held senior as well
as managerial positions in semiconductor manufacturing companies. He has published over 80
technical papers and holds more than 12 U.S. and foreign patents. His portfolio holds long
position
or control in AMD and Intel.
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