Semi Equip Stocks Up On Intel, Samsung Cap Ex Outlook
Semiconductor equipment stocks are flying higher today, getting a lift from Intel’s (INTC) comments yesterday about its 2008 capital spending plans. Kind of ironic: Intel’s 2008 outlook for its own results were below expectations, and have knocked the crap out of its own shares. But the chipmaker also said its cap ex in 2008 would be $5.2 billion, give or take, or about 5% higher than 2007. Citigroup’s Timothy Arcuri notes that Intel’s spending plan is about 5%-10% higher than he had expected. “Virtually nobody expected INTC to guide capex up so soon,” he wrote. And he notes that there was similarly upbeat news from Samsung on their capital spending plans. Samsung expects cap ex to be about flat; there had been expectations that the company might cut spending in the face of sharply falling prices for memory chips.
Expectations for a soft year in semi cap equipment remain; but Arcuri says the stocks were already discounting a worst-case scenario of down 25%.
Ergo, the sector today has staged an impressive rally:
Any comments?
ICDC data from my DJ newswire tonight…
worldwide sales of personal computers grew a healthy 15.5% in the quarter, thus showing no signs of weakness from a souring U.S. economy, the data also showed.
I’m not surprised by Samsung and Intel’s Cap Ex plans. In the current environment and the fact that each new technology node 32nm, 22nm and beyond is so costly that it’s my opinion only 4 companies can continue. They being Samsung, Intel, Toshiba and TSMC. If Samsung can get the investment to bring about a significant cost advantage by going to smaller geometries (ie, die per wafer) they virtually kill the Micron’s and Infineons. In the Intel camp they can spend AMD into bankrupcy or if AMD can’t keep up they die from the chip performance gap. The key to my whole argument is will these guys be able to spend the money to give them a significant advantage. Moore’s law is not dead but it’s only alive for very few. As for the Cap Eq. guys they have the continued prospect of fewer customers that will buy their latest gear. Most of the Cap Eq. cos. need to diversify and leverage their core expertise into non semi industries like AMAT’s move in to solar PV markets.
Tech Trader Daily is a blog on technology investing written from Palo Alto, California by long-time Barron's West Coast Editor Eric J. Savitz. The blog provides news, analysis and original reporting on events important to investors in software, hardware, the Internet, telecommunications and related fields.
