Emerging markets likely to drive growth in semiconductor equipment industry

NEW YORK, USA: As a whole, the semiconductor equipment and materials industry has posted significant gains in 2010. Revenues have surged thanks in part to mobile devices, tablet computers and even the emerging solar market.

Emerging markets are expected to play a critical role going forward as established markets are becoming saturated. Competition is fierce in emerging markets, however, making it challenging for investors to differentiate industry leaders from laggards.

The Bedford Report examines the outlook for companies in the semiconductor equipment
and materials industry and provides research reports on Applied Materials Inc. and United Microelectronics Corp.

The world's second largest contract chipmaker, United Microelectronics, recently reported a sequential slip in monthly sales. In November, the Taiwan-based company posted $344 million in sales, down 2.4 percent month-on-month due to weaker demand for some of its technology products.

While the company's sales are up close to 40 percent this year, UMC forecasts its fourth quarter wafer shipments will fall by mid single-digit percent from the third quarter.

While declining sales figures are bound to catch some investors' eyes, Street consensus is that sales in the semiconductor equipment and materials industry typically lag in November and December.

As mentioned, the solar market has become a popular hotbed for some semiconductor equipment makers. Last month, Applied Materials posted fourth quarter net income of $468 million, or 35 cents a share, compared to $138 million, or 10 cents a share in the same period last year. The company noted a significant surge in solar product sales. In recent years, Applied has sought to reduce its reliance on the chip-equipment business and adapted some of its machinery to make semiconductors for use in the production of solar panel.

Going forward, AMAT was anything but optimistic. The company is predicting that its revenue will fall 8 percent to 15 percent in the November-January quarter.