Semicon West is Semicon Less

• Semicon West was Semicon Less- Less Customers & Vendor
• Everyone is busy as can be, maybe too busy to attend
• Those who were there, talk about supply chain issues & stress
• How long does the party last & where the money comes from?

Semicon West was Semicon Less….

We attended a “Hybrid” version of Semicon West last week. A combination of on line and in person and we choose to go in person.

There were fewer booths, the smallest show we have ever seen.

Most of all the major tool makers were “no shows” with the sole exception of TEL (Tokyo Electron). MIA were ASML, Applied & Lam. KLA had a teeny, tiny booth of zero consequence.

Also missing were the off site hotel suites where the real meetings actually take place.

Many of the booths were very low level sub suppliers to the industry of rubber gloves and bits and pieces.

Perhaps more importantly was the total absence of significant customers. Both Intel and Micron were MIA. They usually make up the large part of attendance. There were obviously very few foreign customers due to travel issues.

Coincident to Semcon West was the DAC (Design Automation Conference ) in the Moscone West, which we also attended. Though attendance was down, the number of booths and size of the conference was closer to normal given the US focus of the EDA industry. Obviously there was little talk of supply chain issues at DAC.

“Whack a Mole”

Most everyone in the tool business that we spoke to at the show are pre-occupied playing “Whack a Mole” AKA “What part are we short of today?”.

We have suggested several months ago that shortages would get worse before getting better as inventories dry up and problems ricochet through the supply chain.

We saw that come true with AMAT missing $300M of revenue.
We will likely see other companies who have kept it together until this point start to experience some impacts with those impacts varying

Demand remains super strong with backlog stretching

If anything , the limited supply and supply chain concerns have kept companies busy placing orders which in large part seem to be driven by fear of not being able to get tools or parts at a later date.

How much of this is double or triple ordering or just “positional” ordering is hard to say.

Companies claim to be trying to make sure the orders are real by asking for cash deposits or other assurances but its certainly impossible to guarantee is things go off a cliff.

Companies that make unique products or are unique suppliers of technology not available from competitors sound like they have the most backlog.

We heard rumors at the show of certain KLA products with 30 month lead times.

It seems as if ASML has an order book that is so full, not just in EUV, that they will likely be lens constrained for several years to come as conservative Zeiss is not substantially expanding capacity.

We wonder how much market share shift will happen in less critical, commodity like applications such as non critical etch or deposition where there may be multiple suppliers that are capable.

Right now with supply being tight it may be less of an issue. We would think that this may favor the smaller or local suppliers.

When does this all end and how?
Where does the money come from?

Most manufacturers are far to busy with supply chain issues to either worry or care about how long and strong the current cycle is.

The bigger question that seems higher on the priority list is where does all the money come from?

If you try to even straight line the current demand, the capital spend goes to infinity and beyond.

Even if Chips for America gets passed it barely a drop in the bucket. Issues with Chinese companies and their ability to access capital remain.

Alibaba bidding on Tsinghua is not very reassuring….but somehow the orders keep flowing from China.

Selling Mobileye to raise money…Good idea

We applaud Intel for selling off Mobileye. We thought is was a huge distraction to their core business. They got super lucky in that they will likely get a bit more than they paid by the spin.

Our main concern is the amount fo time it will take to extract all the money.
Going the IPO route maximizes the return but also takes the longest and Intel needs the money to buy tools and fabs right now….not 5 years from now.

If you add up all the spend that Intel has announced its very far in excess of $100B. Mobileye will make a dent but not that big a dent in their spend. If they don’t get the biggest slug of the “Chips for America” hand out I don’t know where the money will come from.

The Stocks

Right now everyone is both very happy and very busy. There will likely be more earnings and revenue disruptions due to supply chain issues when Q4 is reported but for the most part everyone will report good news.

We don’t think supply chain issues will have broad enough impact in the industry to cause the stocks to slow.

We would likely focus on those with the most immunity to share loss or order loss such as ASML & KLA, but everyone is doing well.

Some of the smaller players could pick up share but right now most chipmakers are too busy trying to get existing tools than try out new tools from second tier vendors.

Materials and consumables also seems like a safe haven as production continues to be quite strong without significant risk to the downside.

Although there weren’t any “good times” parties at Semicon West as in previous strong cycles, the fact that everyone is busy remains reassuring for now.

Also Read:

Supply Chain Breaks Under Strain Causes Miss, Weak Guide, Repairs Needed

KLAC- Foundry/Logic Drives Outperformance- No Supply Chain Woes- Nice Beat

Intel – “Super” Moore’s Law Time warp-“TSMC inside” GPU & Global Flounders IPO

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