The Week In Review: Manufacturing

Analysts discuss Lam-KLA deal; Samsung’s CapEx; New York fab; analog merger mania.

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Lam Research’s proposed move to acquire KLA-Tencor is still generating a buzz in the industry. One executive from Lam has explained the reason for the deal. Meanwhile, analysts are also weighing in. “We believe the deal itself is a positive one for Lam as it supplements its leading etch position with the market share leader in process control with significant accretion and earnings leverage in the combined entity,” said Patrick Ho, an analyst from Stifel Nicolaus, in a research report. “Our greatest concern over this proposed transaction is on the regulatory front, where as we recently learned with the Applied Materials-Tokyo Electron endeavor, there may be more hurdles in the approval process ahead.”

Others agreed. “As AMAT/TEL was shot down after two years of due diligence, this deal could also run into anti-trust issues. Still, Lam and KLA are not direct competitors,” said David Motozo Rubenstein, an analyst from Shared Research in Japan. “Potentially impacted chip gear companies in Japan: Hitachi Kokusai, Tokyo Electron, and Hitachi High Tec, who compete with Lam Research in etching. The potentially larger scale of Lam’s business could impose pressure on its smaller rivals.”

Samsung posted its results for the quarter. Semiconductor sales were up 14%, but operating profit was flat and rose 0.26%. In a report, Weston Twigg, an analyst with Pacific Crest Securities, said: “Samsung reported earnings Wednesday evening, and it guided its 2015 semiconductor capex to 15 trillion KRW (US$13.26 billion), moderately above our expectation of 14.3 trillion KRW (US$12.64 billion). This was a positive surprise for equipment companies. Samsung gave no color on 2016 capex, but conceded that it might be lower (as widely expected) and stated that it has no current plans for expanding memory capacity in 2016.”

North America-based manufacturers of semiconductor equipment posted a book-to-bill ratio of 1.07 in September, compared to 1.06 in the previous month, according to SEMI.

Soraa, a developer of GaN-on-GaN LED technology, announced that it will open a new semiconductor fabrication plant in Syracuse, N.Y. In partnership with the State of New York, the company will construct a new fabrication facility that will employ hundreds of workers. Working in coordination with SUNY College of Nanoscale Science and Engineering (SUNY Poly CNSE), the new facility is on pace for shell completion by the end of this year with production beginning in the second half of 2016. Soraa currently operates an LED fabrication plant in Fremont, Calif., one of only a few in the United States.

Analog Devices and Maxim are talking about a merger. Meanwhile, Texas Instruments and Maxim are also in talks, according to Bloomberg. “We are afraid that if the analog behemoth TXN announces a merger with MXIM as has been rumored, there is a strong possibility that regulatory hassles may materialize,” said Srini Sundararajan, an analyst with W.R. Hambrecht + Co./Summit Research, in a report. “One good aspect of a TXN-MXIM merger may be that MXIM’s chips will be manufactured using 300mm wafers, giving a tailwind to accretion as a result of the lower cost of making those chips. Maxim currently uses 200mm wafers in its own fab and, depending on Samsung’s demand, sometimes battles low utilization. It is likely that Samsung and Apple will continue to buy from a combined MXIM-TXN company, with the result that TXN will gain a foothold with AAPL and Samsung.”

STMicroelectronics is considering a bid for Fairchild Semiconductor, according to Bloomberg. In addition, ST posted mixed results. The company is also weighing its options for the Digital Product Group. “With respect to our Digital Product Group, we are making progress in narrowing the options and we have the objective to announce a final decision in early 2016,” said Carlo Bozotti, president and chief executive of ST.

Integrated Device Technology (IDT) announced an agreement to acquire ZMDI for total consideration of $310 million.

National Instruments announced its acquisition of Micropross, a supplier of test systems for Near Field Communications (NFC), smart cards, and wireless charging test systems.

IC Insights has lowered its IC market forecast in 2015 from +1% to -1%. For 2016, IC Insights sees mid-single digit growth for three reasons: “1. The current excess IC inventory is forecast to be under control by early next year. 2. Worldwide GDP growth in 2016 is expected to show some improvement as compared to 2015; 3. The U.S. dollar is unlikely to show nearly as much strength against the major foreign currencies next year as it did this year.”