- Chat-TMT
- Posts
- Semi Cap Equipment Day
Investing insights in AI, Quantum Computing, and the evolving TMT landscape.
Earnings Highlights
Applied Materials (AMAT) beat analysts’ expectations in the December quarter with revenue of $6.71 billion vs. $6.48 billion and non-GAAP EPS of $2.13 vs. an expected $1.91. As a bell-weather for the semiconductor industry, AMAT made some pretty bullish statements on the conference call last night, led by this:
“In our discussions with customers, we're hearing that overall market dynamics are improving. There is a reacceleration of capital investment by cloud companies, fab utilization is increasing across all device types and memory inventory levels are normalizing.”
The company expects growth across many of its product areas including logic, NANA memory and its DRAM business. It expects DRAM to experience continued demand, driven primarily by AI, which uses high-performance, high bandwidth memory (HBM), which necessitates stacked DRAM dies, doubling the content over standard DRAM and therefore requiring twice the capacity. The company expects HBM will grow at a CAGR of 50% over the next several years. This should also help drive their advanced packaging business in micro bump and through-silicon via, driving 2024 revenue four times higher than in 2023 to nearly $500 million for HBM and $1.5 billion for packaging as a whole.
Source: Applied Materials
Management also highlighted the introduction of gate-all-around-transistors growing share in leading-edge foundry. These are 3D structures can improve power handling by about 30%, key for many applications including AI data centers. The company estimates that these new structures increases AMAT’s available market by $1 billion for every 100k wafer start per month of capacity, and management believes they will capture over 50% market share for the required equipment.
From the conference call, “While major end market inflections, such as AI and IoT, Electric Vehicles and Renewable Energy are already driving semiconductor growth and innovation, it's important to recognize they are still in the early stages of adoption.
For example, high-performance GPUs for AI data centers only represent 6% of leading-edge foundry logic wafer starts today. The full potential of technologies like AI cannot be unlocked without next-generation chips with better performance, power and cost.”
One concern that emerged from the call was the proportion of DRAM revenue coming from customers based in China given the continued political risk associated with shipping semiconductor technology to the country. 45% of DRAM revenue came from China in the December quarter, up from a normalized level of around 30%. This is expected to increase once again in the March quarter, but then work its way down to historical levels over the next few quarters. The other major are of concern involves the automotive market, which is showing signs of weakness across multiple supply chain companies.
For March, management is guiding revenue to $6.5 billion vs. current consensus of $6.3 billion and non-GAAP EPS of $1.97 at the mid-point vs.$1.79. Management expect to see growth throughout calendar 2024, driven primarily by high bandwidth memory and advanced packaging. They also stated repeatedly that they are seeing improvements in inventories and utilization, which bodes well for the semiconductor industry as a whole, and by extension, the broader electronics industry.
Source: PDF Solutions
PDF Solutions (PDFS), a leading provider of analytics software and equipment for the semiconductor market, reported mixed results for the December quarter with higher than expected revenue and in-line earnings per share. Revenue was $41.1 million vs. consensus estimates of $40.7 million and EPS was $0.15. The company experienced strength from its Exensio analytics and test solutions, which countered greater weakness and lower product shipping at its customers than expected in the second half of CY23. Looking ahead, its fabless and foundry customers are reporting expectations for a “relatively weak first half” of CY24, with the March quarter expected to be down, which is in-line with semiconductor seasonality. Management is guiding to flat Y/Y performance in the first half of CY24, with approximately 20% Y/Y in the second half of the year. Management does, however, expect bookings for the year to be up significantly and they expect to build meaningful backlog throughout the year, driven by the increasing demands for “increasingly intelligent semiconductor products” for artificial intelligence.
Guidance, as mentioned above, was weaker than expected in the first half of the year, but stronger for the second half, which is expected to be driven by two large contracts signed in the December quarter of 2023. For March, company is guiding to $40.8 million, in-line with last year, which is lower than the current consensus of $43.7 million. For the full year, however, the company expects to return to top-line growth with an exceptionally strong second half of the year.
While it is likely that the stock will experience weakness after the near-term guidance, this stock tends towards volatility and rapid swings in its outlook. While there is no rush today, any weakness created by the near-term outlook could help set the stock up for a big move higher in the second half of the year.
In Other News
Insider Activity
