Semiconductor Equipment - Berenberg Bank

Semiconductor Equipment
Technology Hardware
but to keep spending to maintain their leadership in the consumer devices
market.
Where are we in the cycle?
We believe we are halfway into the current recovery cycle, and will enter a
more muted growth phase by the end of 2013 or early 2014: ASML, AMAT,
TEL, ASMI, KLA and LAM have all shown improved order intake/shipment
levels from the beginning of 2013, compared to end-2012; hence, we believe we
have entered a recovery cycle from the 2012 trough.
We believe we may exit the recovery phase and enter a more muted growth phase
of the cycle by end-2013/early 2014 for the following reasons.
1) Samsung and Intel’s capex is likely to be spent in H2 and will drive order
growth in H2 2013.
2) TSMC, Samsung, Intel, Globalfoundries and other logic/foundry players
have all budgeted higher/similar capex compared to 2012, and total logic
and foundry capex is currently at a historical high (2013E: $37bn). After
2013, we expect foundry/logic capex to remain at flattish until 2016. In
addition, TSMC has indicated that its 2014 capex will be similar to the
2013 level. We expect the solid order intake level to be maintained after
2013/early 2014, but growth is likely to be muted.
3) Memory spending has already picked up from the 2012 trough level since
mid-2013. ASML, KLA and LAM have all indicated that memory spending
is recovering. We estimate memory capex to grow at 11-15% in the next
four years. However, as it only accounts for 29% of total capex, which is
too small to drive significant capex hikes. Historically, memory spending
used to account for up to 57% of total capex and hence had a greater
impact on overall capex.
Will the Apple/Samsung/TSMC/Globalfoundries shift be a zero
sum game?
In our view, any shift is a small positive for equipment vendors, depending
on which of them Apple is shifting to: Since last year, there has been much
speculation about whether Apple will shift its foundry orders from Samsung to
TSMC/Intel, and whether Apple will buy fabrication plants (fabs) from United
Microelectronics Corporation (UMC) or Globalfoundries. In our opinion, these
shifts can be a small positive on a net basis for some equipment vendors, instead of
simply a zero sum game. The new foundry is likely to build capacity which was not
required previously; at the same time, the old foundry may cut its original spending
level, but it may have already committed some capex as fab-building projects are
multi-year projects.
If Apple moves to TSMC, we believe ASML, AMAT, ASMI, and LAM will all
benefit, as: 1) TSMC’s 20nm is lithography-intensive, and it only buys from ASML;
2) AMAT has a strong relationship with TSMC (although the decrease in the
Samsung order may have a negative impact on AMAT); and 3) TSMC 20nm is high
K metal gate (HKMG)-based, which requires the ALD tool from ASMI.
If Apple chooses Intel for its foundry orders, we believe TEL may benefit, with
ASML also benefiting, but to a lesser extent, as 1) TEL has a close bond with Intel
in relation to its etching tools, 2) AMAT does not have a strong relationship with
Intel, 3) ASML may receive new orders, but it has to share Intel orders with Nikon,
and 4) Intel’s capacity is 100% HKMG-based, which only leaves limited upside for
ASMI.
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