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| Recovery of Semiconductor Equipment Business Continues with Cautious Optimism |
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Ed Wijaranakula, Ph.D.
Director of Market Analysis, Infotix
Systems, Inc. - July 30, 1999
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On July 21, the North American semiconductor equipment industry posted the June, 3-month moving average for semiconductor equipment shipments of $1.17 billion, down 28.1 percent
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from June 1998. This represents a slight decline in the semiconductor equipment shipments, compared to May 1999 which was $1.18 billion. The 1999 year-to-date semiconductor equipment shipments is $6.126 billion, down 25.7 percent from the same period last year which was $8.24 billion. Mr. Stanley Myers, President of SEMI, suggested that the recovery in both the semiconductor chip and equipment industries could be slow and steady based upon the June data. "Many analysts and attendees at SEMICON West last week supported this sentiment,
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expressing continued cautious optimism for a solid recovery into 2000." added Mr. Myers in a SEMI press release.
For the second quarter of 1999, the total semiconductor equipment shipments were estimated to be $3.51 billion, down 7.6 percent from the second quarter of 1998 which was $3.8 billion. This is in agreement with the observed decline in revenues, between 7.8 and 8.5 percent, announced by the major semiconductor equipment manufacturers including Novellus Systems, KLA-Tencor and Lam Research.
Smaller chip equipment manufacturers such as Asyst, Semitool and Nanometrics appeared to experience even stiffer declines for the quarter ending June 30 where revenues were down between 28 and 36 percent, compared to the same period last year. Major chip equipment manufacturer earnings were mixed. Novellus Systems' earnings declined 23 percent, compared to the same quarter last year, while earnings growth reported by companies such as KLA-Tencor and Lam research came from cost cutting, primarily by eliminating their workforce. We conclude that the overall earnings fundamentals for chip equipment companies still remains weak. |
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Our data
based upon the global chip sales, suggests that the month-over-month slowdown in chip equipment shipments could be followed by a slowdown in the global semiconductor sales for the month of June. Major chip makers such as Intel, Motorola and Texas Instruments may reduce spending during the slow summer period to reflect the slowdown in chip sales. Most financial analysts argue that the demand from Korean DRAM manufacturers and Taiwanese semiconductor foundries, including Taiwan Semiconductor Manufacturing Co. (TSMC) and United Microelectronics Corp., for chip equipment will be strong enough during the summer and fall periods to support revenue and earnings growth of the semiconductor equipment manufacturers in the third and fourth quarter. We believe that weak dollars, uncertainty in interest rates, and a slowdown in consumer spending could affect the recovery of the semiconductor equipment and chip businesses.
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About the Author: Dr. Ed Wijaranakula is presently the Director of Market
Analysis 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 12 U.S. and foreign patents. His portfolio holds long positions
or controls in CSCO, EMC, INTC, SUNW and XLNX.
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