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Week In Review: Manufacturing, Test

Updated 10/27: AMD buys Xilinx; Lam, CyberOptics results; IC outlook.

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Chipmakers
AMD and Xilinx have entered into a definitive agreement for AMD to acquire Xilinx in an all-stock transaction valued at $35 billion. With the proposed deal, AMD will enter the FPGA business, putting it further in competition with Intel. The transaction has been unanimously approved by the AMD and Xilinx boards. The transaction is expected to close by the end of calendar year 2021. Until close, the parties remain separate, independent companies. Lisa Su will lead the combined company as CEO. Xilinx President and CEO, Victor Peng, will join AMD as president responsible for the Xilinx business and strategic growth initiatives, effective upon closing of the transaction. In addition, at least two Xilinx directors will join the AMD board.

Intel posted mixed results in the quarter, and also cut its capital spending. “Intel’s updated CY20 capex guidance to $14.2-$14.5 billion, from prior view of $15 billion. Around $300 million of the reduction is due to the pending sale of the NAND assets to SK Hynix. The new capital spending will be down 11% year-over-year. Intel spent $3.7 billion in C3Q20, and as of September, the company has spent about $10.4 billion in capex or 72% of the revised full-year estimate. We model Intel’s WFE (Wafer Fab Equipment) spending to be down 18% year-over-year in CY20 to around $9.3 billion,” said Krish Sankar, an analyst from Cowen, in a research note. “We updated our global WFE outlook to 14% year-over-year increase to $54 billion this year, and +6% to $57 billion in 2021. We expect foundry/logic capex to remain strong in CY21, but the incremental growth in WFE is biased towards memory next year.”

As reported, Intel is exiting the NAND flash market. SK Hynix has signed a deal to acquire Intel’s NAND memory and storage business for $9 billion. The deal doesn’t involve Intel’s 3D XPoint, a next-generation memory technology.

Cree has entered into a definitive agreement to sell its LED products business unit to SMART Global Holdings for up to $300 million. “This transaction positions us with a sharpened strategic focus to lead the industry transition from silicon to silicon carbide and further strengthens our financial position, which will support continued investments to capitalize on multi-decade growth opportunities across EV, 5G and industrial applications,” said Cree CEO Gregg Lowe.

Pixelworks has entered into an agreement with MTM-Xinhe Investment, a consortium of investors from China. Pixelworks will sell 7% of its shares in exchange for approximately $6.6 million dollars.

Fab tools
For the Sept. 2020 quarter, Lam Research reported revenue of $3.177 billion and net income of $823 million, or $5.59 per diluted share on a U.S. GAAP basis. This compares to revenue of $2.792 billion and net income of $697 million, or $4.73 per diluted share, for the quarter ended June 28. “Lam generated outstanding results in the September quarter with record revenues and earnings per share,” said Tim Archer, Lam Research’s president and CEO.

“LRCX posted revenue and EPS well above consensus,” said Weston Twigg, an analyst at KeyBanc, in a research note. “Memory customers remain the strongest driver of demand, accounting for 58% of systems revenue in the quarter; we forecast moderate undersupply in both DRAM and NAND in 2021, which should drive equipment demand even higher next year. LRCX also posted record customer support (CSBG) revenue, which includes service, upgrades, and sales of lagging-edge equipment. F2Q revenue was guided well above consensus; however, GM was guided moderately lower q/q on mix. Despite the beat and strong guidance, LRCX reiterated its mid-to-high $50B view for overall equipment demand in 2021, suggesting that share gains and CSBG growth are supporting its out-performance.”

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In a video, Jan Willis provided the results of the ninth annual eBeam Initiative Luminaries survey, including predictions on the impact of COVID-19 on mask revenue, multi-beam mask writing, readiness of EUV pellicles and actinic inspection, and the pervasiveness of curvilinear shapes on masks.

Packaging
CyberOptics reported sales of $20.8 million for the third quarter of 2020 ended Sept. 30, an increase of 68% from $12.4 million in the third quarter of 2019. Net income for the third quarter of 2020 was $1.8 million or $0.24 per diluted share. The company saw an increase in sales of sensors and inspection/metrology systems.

Market research
In a blog, Bob Johnson, an analyst at Gartner, had a fairly bullish outlook regarding semiconductors and fab equipment.

North America-based manufacturers of semiconductor equipment posted $2.75 billion in billings worldwide in September 2020, according to SEMI. The billings figure is 3.6% higher than the final August 2020 level of 2.65 billion, and is 40.3% higher than the September 2019 billings level of $1.96 billion. “September billings of North America-based semiconductor equipment manufacturers mark another month of growth,” said Ajit Manocha, SEMI president and CEO. “The semiconductor industry remains resilient despite challenges posed by the pandemic and geopolitical tensions.”



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