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Tuesday, September 26, 2006

Semi Equipment Orders Don’t Get Better Than This

By William Trent, CFA of Stock Market Beat

Eric Savitz points to research from JPMorgan’s Jay Deanha anticipating higher orders for semiconductor equipment.

He says that, driven by orders from Samsung, Hynix and Nanya, “we expect most equipment suppliers, particularly memory centric ones, to deliver the high end or better orders relative to third quarter guidance and better-than-currently anticipated fourth quarter booking guidance.
Apparently Deanha believes that, somehow, a semiconductor industry growing sales at approximately 10% over last year can support equipment orders even higher than the current 70% year/year growth rate, despite August marking the eighth consecutive month that equipment orders grew faster than underlying demand for semiconductors.

Despite Microsemi’s sneak announcement.

Despite Maxim’s miss.

Despite Silicon Labs’ warning.

Not to mention Analogic, Microchip, or Xilinx.

Or Texas Instruments saying Asian cell phone chip inventories were high. Or Intel’s Days’ Inventory being at a multi-year high.

Somehow, in the midst of all this, Deanha believes the chipmakers need even more equipment? Please. As we said last week, we are probably near a turning point for semis. But if we are, it will be because they order less equipment and are thus able to bring supply back in line with demand.

The author may hold a position in the securities discussed. A current list of the author's holdings is available here.

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