Capex Higher in H2 2013 Driving Stock Values for Selected Semiconductor Companies: a Wall Street Transcript Interview with Patrick Ho of Stifel Nicolaus & Company

Wall Street Transcript

67 WALL STREET, New York - June 10, 2013 - The Wall Street Transcript has just published its Semiconductors Report offering a timely review of the sector to serious investors and industry executives. This special feature contains expert industry commentary through in-depth interviews with public company CEOs, Equity Analysts and Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

Topics covered: Semiconductor Capital Equipment - Cloud Computing, Mobile Device Consumer Demand - Semiconductor Inventory Burnoff - Improvement from Cyclical Bottom - Semiconductor Capital Equipment Spending - New Computing Platform Demand

Companies include: Intel Corporation (INTC), Lam Research Corporation (LRCX), Applied Materials Inc. (AMAT), Nanometrics Inc. (NANO), Nova Measuring Instruments Ltd (NVMI), Taiwan Semiconductor Manufactu (TSM), KLA-Tencor Corporation (KLAC), Apple Inc. (AAPL) and many others.

In the following excerpt from the Semiconductors Report, an expert analyst discusses the outlook for the sector for investors:

TWST: As your companies have started reporting Q1 earnings, what have been some of the key takeaways? Have there been any notable surprises?

Mr. Ho: I would say the most notable surprises, and I wouldn't consider them major surprises, but Intel (INTC) lowering its capex -- when they reported their earnings, they lowered their capex by $1 billion. On the positive side, ASML (ASML) gave more positive commentary on the memory capex market. So all in all, looking at the big picture, my industry outlook really hasn't changed, but the mix has somewhat changed, even declined here, increased in other areas. The total number hasn't changed, but the mix has kind of moved a little bit.

TWST: Who will be the beneficiaries of the shift in mix?

Mr. Ho: I think in general, if the large-cap companies are all going to be favorably biased at some level. I think a company like Lam Research (LRCX) is going to be more favorably biased if memory capex recovers faster or sooner than expected. They have better exposure to that customer segment than a lot of their peers. I also think Applied Materials (AMAT) will benefit somewhat from this shift. So those are at least two names that I think that should be clear beneficiaries.

TWST: You believe there will be some upside for your group in the second half of 2013. What will be the drivers of that upside, and which stocks do you expect to be the biggest beneficiaries?

Mr. Ho: I think the biggest two variables that will be the drivers of potential upside in the second half of the year is when memory capex spending comes back sooner than expected. I think if you look at the pricing environment for both DRAM and NAND, they've clearly shown some improvement to start the year particularly. Over the first three months of the year, you've seen pricing improvements from both NAND as well as DRAM, and in fact probably more so in DRAM than NAND. If this environment continues, I do believe that there is an opportunity for capex spending to increase before year-end.

Now, I still think it's going to be much more second-half-weighted than anything currently, but that would be one area of a potential upside. So again, some of the names that I believe on the memory side that would benefit include Lam Research. I think a company like Nanometrics (NANO), and there's another small-cap company called Nova Measuring Instruments (NVMI), they are all well-exposed to the memory segment, so if that comes back sooner than anticipated, those are some of the names that should be beneficiaries.

The other variable that I think could be potential upside is on the foundry end...

For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.

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