Semiconductor manufacturing equipment trends
The semiconductor market is seeing demand weakness, especially in China. SME (semiconductor manufacturing equipment) suppliers are also seeing demand weakness as memory chip suppliers reduce their capital spending to control oversupply.
While capital spending is weak in the memory market, it’s strong in the logic and foundry markets. Intel (INTC) is investing in a new fabrication plant in Israel and expanding existing plants. Intel and TSMC (TSM) are moving to advanced nodes that use material-intensive EUV (extreme ultraviolet) lithography.
KLA Corporation’s stock rises on earnings beat
The demand in the foundry space is working well for KLA-Tencor (KLAC), recently renamed KLA Corporation. On January 29, KLAC reported better-than-expected fiscal 2019 second-quarter earnings sending the stock up more than 3% in the first half of January 30’s trading. Stocks of peers Lam Research (LRCX) and Applied Materials (AMAT) also rose 1.4% and 2.5%, respectively.
In the second quarter of fiscal 2019, KLAC’s revenue rose 15% YoY (year-over-year) to $1.12 billion, beating the analyst estimate of $1.07 billion. For the third quarter of fiscal 2019, the company expects revenue to fall 10% YoY to $920 million at the midpoint, driven by declines in memory, which should partially be offset by strength in the advanced foundry and logic spaces.
KLAC stated that, after three years of strong growth, memory capacity spending is falling due to weakness in the smartphone and data center markets. However, the spending decline shows memory chipmakers’ disciplined capacity investment, which should rebalance demand and supply over time and drive spending in the long term.
Meanwhile, KLAC expects its semiconductor shipment mix to shift from memory to foundry. It expects its memory mix to reduce from 61% of its total shipments in the December 2018 quarter to 40% in the March 2019 quarter and its foundry mix to increase from 24% to 50%. It expects logic shipments to reduce from 15% to 10%.
KLAC is acquiring electronics products equipment supplier Orbotech for $3 billion and plans to complete the acquisition by the end of March 2019. It will update its guidance post-acquisition.
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