The Week In Review: Manufacturing

Chipmakers
As reported, Samsung is expanding its efforts in the foundry business, a move that will put the company on a collision course with TSMC and others. Samsung’s foundry unit is expanding is logic portfolio and moving into the specialty foundry front. It will also make its advanced packaging technology available, such as 2.5D interposers, to customers. In a blog, Samsung said it plans to expand its logic portfolio in three areas: 1) It will add RF and embedded nonvolatile flash for its 28nm FD-SOI offerings. 2) It has rolled out a third-generation 14nm technology–dubbed 14LPC, which is a low-cost version of its 14nm technology. 3) And it disclosed two processes within its upcoming 10nm lineup–10LPE and 10LPP.

It was a bad week for Intel amid the layoff news. On the other hand, Intel is maintaining its capital spending plans. “Intel maintained its capex guidance at $9.5B for 2016,” said Amit Daryanani, an analyst with RBC Capital Markets, in a report. “Intel has started ramping its 3D NAND fab in China and expects to start production later this year. The company also commented that 10nm is on track.”

It’s not all rosy, however. Look for a fab closure (or two) at Intel, especially 11x in New Mexico, according to reports.

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As reported, IHS posted its rankings for chipmakers in terms of sales for 2015. Interestingly, Apple is ranked No. 14 on the list in terms of chipmakers in 2015. Is Apple a chipmaker? In an e-mail, Dale Ford, an analyst at IHS, explained: “Last year we made a change to our previous ‘rules’ for including companies in our semiconductor rankings. Previously we only included companies that sold at least some part of their semiconductor products on the merchant market. However, once Apple began designing and outsourcing production of its own processor for its own products, we made the decision to include Apple in our semiconductor rankings. We use our market share data as the basis for our semiconductor market sizing and the value of chips designed by Apple was simply too large to exclude from our market sizing once they moved from Samsung sourced chips to their own chip.

”Previously, Samsung claimed it had IP in the Apple designed chip that allowed it to claim the revenues as product revenues and not foundry revenues. Once Apple sourced the chip from TSMC, Samsung was no longer able to make this claim and we now count any business between Samsung and Apple as foundry revenue for Samsung rather than product revenue. In order to create an estimate of the fair market value of the Apple designed/owned ICs, we are able to leverage the research in our teardown service to assess the chip value and then apply that to the shipment data published by Apple and tracked by our smartphone research service,” Ford said.

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Qorvo has signed a definitive agreement to acquire GreenPeak Technologies, a supplier of ultra-low power, short range RF communication technology.

Fab tool vendors
As expected, Apple has signed a $2.6 billion supply agreement with Samsung for OLEDs, according to multiple reports. Apple will migrate from LCDs to OLEDs for the iPhone. The deal is a boom for some flat-panel display equipment makers. “We estimate capital intensity for traditional silicon LCD is roughly ~10% of revenue,” RBC’s Daryanani said in a report. “According to Applied Materials, opportunities at an OLED factory are more than three times larger than at a traditional silicon LCD factory. Assuming a ~30% capital intensity for OLED, the $2.6 billion supply contract could require ~$780M equipment spending. Applied Materials serves roughly 10-15% market share in the display equipment market and enjoys a very high share in their SAM. Assuming the same market share, Applied Materials could see $80-100M display revenue from the new contract.”

Lam Research posted its results for the quarter ended March 27, 2016. For the quarter, revenue was $1.314 billion and net income was $143 million, or $0.82 per diluted share on a GAAP basis. “Lam is off to a very solid 2016 beginning, with our customer trust priority and strong execution combining to deliver financial results that met or exceeded expectations across the board,” said Martin Anstice, Lam Research’s president and chief executive.

During a conference call, Anstice said: “We retain our 2016 WFE outlook of $33 billion plus or minus 2 billion. And from a momentum perspective guide, the first half ’16 shipments (are) stronger than our second half ’15.”

“Lam’s high exposure to the 3D NAND build-out appears to be nicely offsetting DRAM weakness, providing Lam with an opportunity to outgrow the industry once again this year. 3D NAND spending may slow somewhat in 2H, but Lam should also have reasonably good 10nm logic/foundry exposure in 2H, especially as it expands its etch footprint at Intel, and DRAM spending has likely reached a trough as Micron and SK hynix focus on 20nm transitions and Samsung begins its 1xnm transition,” said Weston Twigg, an analyst with Pacific Crest Securities, in a report. “Lam Research’s management expects the KLA-Tencor acquisition to be completed some time in June or July this year, plus or minus a couple of months. Management highlighted recent approvals from regulatory bodies in Israel, Taiwan and Ireland. We continue to expect the deal to close sometime this year.”

Market Research
What are the hot IC markets? IC Insights released its forecast for 33 major IC product categories through 2020. Fourteen product categories—topped by cellphone application processors and signal conversion devices—are expected to exceed the 2% growth rate forecast for the total IC market this year.

Worldwide shipments of virtual reality (VR) hardware will skyrocket in 2016, with total volumes reaching 9.6 million units. Led by key products from Samsung, Sony, HTC, and Oculus, the category should generate hardware revenues of approximately $2.3 billion in 2016, according to IDC.

North America-based manufacturers of semiconductor equipment posted a book-to-bill ratio of 1.15 in March, compared to 1.05 in the previous month, according to SEMI.

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