This Day On The Street
Continue to site right-arrow
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here
Stocks Under $10 with 50-100% upside potential - 14 days FREE!

Chip-Equipment Market: Uncertain 2010

Stocks in this article: INTC AMD MU

Reaching growth of more than 50% will result in nearly $20 billion in wafer fab equipment purchases for technology improvements, $7 billion more than in 2009 for a net zero growth in new fabs built.

Since I've been in the business of analyzing the semiconductor equipment market since 1983, I value statements made by respected executives in leading equipment companies, because after all they're supposed to eat, sleep, and drink their business while keeping their ears to the ground and their fingers on the pulse.

Below are quotes from Steve Newberry, president and CEO of Lam Research (LRCX):

"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% to 70% over 2009."

Newberry's forecast of 55% to 70% may have been influenced by the forecasts from the aforementioned experts. But the real guts and glory come from the statement a little further in Lam Research's earnings conference call:

"OK. 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, a president and CEO of leading equipment company, and he doesn't know. And his statement, " 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, and doesn't think anyone else does, what's the point of advertising forecasts that can be inferred as wrong? Take a look at Qualcomm (QCOM) and Motorola (MOT), with their forecasts for growth in the cell phone sector. I bet they don't believe the forecast either.

-- Written by Robert Castellano in New Tripoli, Pa.

At the time of publication, Castellano had no positions in the stocks mentioned.

Robert N. Castellano, Ph.D, is President of The Information Network, a leading consulting and market-research firm for the semiconductor, LCD, HDD and solar industries. Castellano is internationally recognized as one of the leading experts in these areas. He has nearly 25 years of expertise as an industry analyst. Castellano has provided insight on emerging technologies to many business and technical publications, including Business 2.0, BusinessWeek, The Economist, Forbes, Investor's Business Daily, Los Angeles Times Magazine, The New York Times, USA Today and The Wall Street Journal. He is a frequent speaker at conferences and corporate events. He has over 10 years' experience in the field of wafer fabrication at AT&T Bell Laboratories and Stanford University before founding The Information Network in 1985. He has been editor of the peer-reviewed Journal of Active and Passive Electronic Devices since 1985. He is author of the book "Technology Trends in VLSI Manufacturing," published by Gordon and Breach. His book "Solar Cell Processing" was published in 2009 by Old City Publishing. He received his Ph.D. in solid state chemistry from Oxford University.
2 of 2

Select the service that is right for you!

Action Alerts PLUS
Try it NOW

Jim Cramer and Stephanie Link actively manage a real portfolio and reveal their money management tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
  • Weekly roundups
TheStreet Quant Ratings
Try it NOW
Only $49.95/yr

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
  • Upgrade/downgrade alerts
Stocks Under $10
Try it NOW

David Peltier, uncovers low dollar stocks with extraordinary upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
  • Weekly roundups
Dividend Stock Advisor
Try it NOW

Jim Cramer's protege, David Peltier, identifies the best of breed dividend stocks that will pay a reliable AND significant income stream.

Product Features:
  • Diversified model portfolio of dividend stocks
  • Alerts when market news affect the portfolio
  • Bi-weekly updates with exact steps to take - BUY, HOLD, SELL
Real Money Pro
Try it NOW

All of Real Money, plus 15 more of Wall Street's sharpest minds delivering actionable trading ideas, a comprehensive look at the market, and fundamental and technical analysis.

Product Features:
  • Real Money + Doug Kass Plus 15 more Wall Street Pros
  • Intraday commentary & news
  • Ultra-actionable trading ideas
Options Profits
Try it NOW

Our options trading pros provide daily market commentary and over 100 monthly option trading ideas and strategies to help you become a well-seasoned trader.

Product Features:
  • 100+ monthly options trading ideas
  • Actionable options commentary & news
  • Real-time trading community
  • Options TV
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!


DOW 17,804.80 +26.65 0.15%
S&P 500 2,070.65 +9.42 0.46%
NASDAQ 4,765.38 +16.9840 0.36%

Brokerage Partners

Rates from

  • Mortgage
  • Credit Cards
  • Auto

Free Newsletters from TheStreet

My Subscriptions:

After the Bell

Before the Bell

Booyah! Newsletter

Midday Bell

TheStreet Top 10 Stories

Winners & Losers

Register for Newsletters
Top Rated Stocks Top Rated Funds Top Rated ETFs