The Week In Review: Manufacturing

Lam-KLA update; GF foundry deal; Lam, NI, Samsung and UMC post results.


Fab tools
Lam Research’s proposed move to acquire KLA-Tencor has been pushed out for the second time. The deal was supposed to be completed by mid-2016. Then, it was pushed out to the third quarter amid regulatory issues. Now, the companies hope to close the deal by the fourth quarter of 2016. “The KLA-Tencor acquisition is expected to close in the December quarter. This reflects another pushout as the company negotiates with approval agencies. We think the deal will close in (calendar) Q4, but we may see a MOFCOM withdraw/refile soon,” said Weston Twigg, an analyst with Pacific Crest Securities, in a report. MOFCOM is the Ministry of Commerce in China.

In addition, Lam announced its financial results for the quarter ended June 26. Sales and orders increased for the quarter, compared to the figures in the previous period. “LRCX reported impressive upside to June quarter results and guided September quarter ahead of expectations driven by strength on 3D NAND ramps (tracking towards high-end of expectations) and a pick-up in foundry/logic spend related to 10nm/7nm, partially offset by sustained softness in DRAM (expect capex down 40% in 2016),” said Amit Daryanani, an analyst with RBC Capital Markets, in a report.

KLA-Tencor posted its sales and earnings for the quarter. “KLA-Tencor posted very strong FQ4 results, but guided FQ1 revenue down around 21% q/q at the midpoint and EPS down 43% q/q at the midpoint. We believe strength came from TSMC, as KLA-Tencor generally sees foundry demand improve a quarter ahead of peers and TSMC activity is picking up elsewhere. The sharp decline in guidance is a concern, as it could suggest that high TSMC demand may spike quickly, then fade for other companies this quarter,” said Twigg from Pacific Crest Securities.

National Instruments reported sales of $306 million for the second quarter, up 1% year over year in U.S. dollar terms with core revenue up 3% year over year. “Our platform-based approach built around highly differentiated software has created a large ecosystem of customers, partners and technologies that are key drivers of the long-term growth and profitability of the company,” said James Truchard, NI president, co-founder and CEO. “I am particularly excited about our success in customer applications for prototyping next-generation 5G wireless algorithms and our work with automotive radar for the connected car.”

Applied Materials has announced the appointment of Judy Bruner to serve on its board. Bruner has also been appointed to serve as a member of the audit committee of the board. Bruner served as executive vice president, administration and chief financial officer of SanDisk from 2004 until its acquisition by Western Digital in May of 2016.

Rambus has developed an R+ DDR4 PHY technology based on the GlobalFoundries’ 14nm LPP process. In addition, GlobalFoundries has named Wallace Pai as its vice president and general manager of its China unit. He joins the company from Synaptics, where he was vice president and general manager for the touch and display business.

Samsung Electronics has announced financial results for the second quarter ended June 30. The company’s memory business saw a growth in demand in the quarter. The System LSI business saw gains amid stronger demand for 14nm devices. “Samsung indicated that its combined capex for semiconductor and display will be up over 2015, consistent with prior comments. It indicated that capex will be concentrated on OLED and 3D NAND capacity,” Pacific Crest’s Twigg said. “Samsung also mentioned that it expects to ramp its 4th Gen 3D NAND product by the end of this year.”

United Microelectronics Corp. (UMC) posted its results for the second quarter of 2016. Second quarter consolidated revenue was up 7.5%. Overall capacity utilization was 89% amid a surge in its 28nm business. “Looking into next quarter, we anticipate a slight increase to our overall foundry revenue, with 28nm revenue contribution expected to reach 20% or more. Our 40nm demand is also expected to remain stable,” said Po-Wen Yen, CEO of UMC. “As our advanced node performance remains on track, we do anticipate a decline in 8” demand due to changes in customer mix and market dynamics. While we continue to expand additional 28nm capacity at Fab 12A in Tainan, UMC’s 12” Xiamen operations, 12X, is set to begin pilot production.”

Analog Devices has entered into a definitive agreement to acquire Linear Technology. The deal is valued at $14.8 billion.

STMicroelectronics has acquired ams’ assets related to NFC and RFID reader businesses. Approximately 50 technical experts from ams have been transferred to ST.

China’s LeEco has announced a definitive agreement to acquire Vizio for $2 billion. By combining TV shipments of Vizio, the second largest TV brand in North America, and LeEco, the seventh largest in China for 2015, LeEco would surpass Skyworth as the global no. 6 brand on the basis of 2015 shipments, according to IHS Markit. “From 2005 to 2015, Vizio, a leading U.S. TV brand, has been growing rapidly in the TV market, while LeEco, a well-known online video and internet TV content provider in China, started a TV business only in 2013,” according to the research firm. “After the completion of the Vizio acquisition, LeEco will effectively shortcut the learning curve for the US TV market via Vizio’s expertise.”

Market Research
Worldwide silicon wafer area shipments increased during the second quarter 2016, when compared to first quarter 2016 area shipments, according to the SEMI Silicon Manufacturers Group (SMG).

The global electronics market will consume over 127.5 billion analog ICs in 2016, which translates to several analog ICs per electronic device, according to Semico. “The Internet of Things presents a great growth potential for analog and sensors, but large volumes are still a few years away,” said Jim Feldhan, president of Semico Research. “Consequently, we are seeing an inflection point in the analog market. Over the next 5 years, analog sales growth will slow to a CAGR of 4.3% in dollar terms and 7.9% in unit terms.”

Electricity meter manufacturers shipped more than 100 million smart meters globally in 2015, generating more than $4 billion in hardware revenue. The market is estimated to have grown by 4% over 2014, and is forecast to reach almost $7 billion annually by 2021, according to IHS Markit. China is the big market for smart meters.

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