Contributed by The Information Network, courtesy, Dr. Robert N. Castellano.
NEW TRIPOLI, USA: The real key to understanding the equipment market came from Steve Newberry CEO and President of Lam Research recently in their Earnings Call, which I’ve quoted a bit further down this note.
As I’ve pointed out recently in other Insight Notes, within the past month many “experts” have jumped on the bandwagon announcing extraordinary gains to be made in the semiconductor equipment market in 2010.
In recent weeks, trade group SEMI (funny, I thought they did Semicons and standards) and market research firm Gartner/Dataquest have issued forecasts calling for the chip equipment market to grow in excess of 50 percent in 2010, following a decrease of nearly 50 percent in 2009. Then iSuppli Corp piped in, calling for 46 percent growth (funny, I didn’t even know they had a semiconductor equipment group).
After being in the business analyzing the semiconductor equipment market since 1983, I tend to overlook certain statements. But I value statements made by respected executives in leading equipment companies, because after all, they are supposed to eat, sleep, and drink their business while keeping their ears to the ground and their fingers to the pulse. How else would they justify their salaries and stock options?
Below are Steve Newberry quotes:
“As we look to the broader industry trends for 2010, we expect the recent strength in customer demand for new systems to continue, at least in respect to the first half of the year. We estimate that in 2009, there was wafer fabrication equipment spending of approximately $13 billion, and we expect at this moment in time that the market for equipment purchases in 2010 will be somewhere in the range of $20 billion to $22 billion, likely up 55 percent to 70 percent over 2009.”
OK, those numbers jive with the number above, so maybe that’s where he got them from. But the real guts and glory come from the statement a little further in the Call:
“Okay. Well, no disrespect intended, but what I would say, whenever I talk about what is going to happen, it's not what is going to happen, it's always predicated with based on what the customers are telling us today, based on what they are planning in terms of orders and shipments, this is what it looks like.
"And clearly, with the lead times as short as they are, I wouldn't believe anything anybody says because nobody knows. All you're really getting from me or from anybody else is what the current snapshot in time is, in terms of what the customers are saying they want to do, and what they're currently doing in this quarter.
"And so relative to what's actually going to happen in the second half of 2010, I don't know. I just know that if you take the current level of our shipment output on a systems basis, if we continue to ship at that rate, then the industry would have to spend about $28 billion in wafer fab equipment. And I think that that's less likely to be what they do. And so, therefore, when I look at what they're telling me they're planning on doing, they're telling me they're planning on taking less shipments in the second half than they are planning to take in the first half. Whether that's actually how it plays out, I don't know.”
WOW. An industry expert, CEO and President of a leading equipment company, and he doesn’t know! And his statement (I underlined [italicized here] it), I wouldn't believe anything anybody says because nobody knows is the master stroke that sums up the industry.
So, if he doesn’t know, why are you and companies like yours paying Dataquest/Gartner, iSuppli, and SEMI, big bucks for crap advice that even Newberry, an extremely respected leader in the equipment community can’t substantiate!
Are they smarter than Newberry and his co-executives at one of the best run companies in the industry? I doubt it. Did you know that Gartner had revenues of $1.3 billion in its fiscal year ending December 2008 while Lam Research had revenues of $1.1 billion in its fiscal year ending June 2009! LESS!
As I’ve said before, our leading indicators don’t support 50 percent growth. With no fabs built, $28 billion is a lot of money for 50 percent technology purchases. And with the economy still waiting for the other shoe to drop, high investments and capex is ill advised.
Take a look at Qualcomm and Motorola, with their forecasts for growth in the cell phone sector. I bet they don’t believe the forecast either.
Source: The Information Network