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October 25, 2016

2016 semiconductor capex highest in 5 years

2016 semiconductor capex highest in 5 years
by Bill Jewell on 10-25-2016 at 4:00 pm
Categories: Foundries, Semiconductor Intelligence, Semiconductor Services

Global semiconductor capital expenditures (capex) are expected to return to the level of 2011 either this year or next. 2011 was the record year for capex as the industry returned to growth following the 2009-2010 recession. IC Insights’ August 2016 forecast called for 3.5% growth in capital spending to reach $67.1 billion, the highest level since $67.4 billion in 2011. Gartner’s October 2016 projection was a slight 0.3% downturn in 2016 followed by 7.4% growth in 2017 to reach $69.3 billion, surpassing $65.8 billion in 2011.

Semiconductor manufacturing equipment accounts for about half of semiconductor capital spending. In August 2016, SEMI called for 4.1% growth in equipment in 2016, accelerating to 10.6% in 2017. Gartner’s October forecast has fab equipment growing in the 6% to 7% range in both 2016 and 2017. Neither SEMI nor Gartner has 2017 equipment returning to the 2011 levels of $44 billion to $45 billion.

Solid growth in semiconductor fab equipment in 2016 is supported by data from SEMI and the Semiconductor Equipment Association of Japan (SEAJ). Combined SEMI and SEAJ data shows 3[SUP]rd[/SUP] quarter 2016 semiconductor manufacturing equipment billings were $8.5 billion, up 7% from the prior quarter and up 12% from a year ago. Bookings were $8.6 billion up 27% from a year ago but down 2% from the prior quarter. The resulting book-to-bill ratio was 1.02. We at Semiconductor Intelligence are projecting full year 2016 equipment billings will be up 12% from 2015. The slowing in bookings could be indicating billings are close to a peak. However even if billings remain at the 3[SUP]rd[/SUP] quarter 2016 level through the end of 2017, 2017 growth would be around 8%.

Which companies are driving semiconductor capital spending? For several years, capex has been dominated by microprocessor giant Intel, the largest memory company Samsung, and the major wafer foundry TSMC. These three companies have accounted for 44% to 56% of total capex for each of the last five years. The table below shows the largest companies in capital spending based on 2016 projections. Most of the 2016 numbers are based on company guidance. IC Insights estimates were used for Samsung, GlobalFoundries and total capex.

Samsung should have the largest capex in 2016 at $11.0 billion, according to IC Insights. Samsung has had the largest capex for several years. Intel and TSMC are each projecting 2016 capex of about $9.5 billion. The four largest memory companies account for 37% of capex. Besides Samsung, Micron Technology capex is $5.4 billion (based on fiscal 2016 ended September 1) and SK Hynix projects $5.2 million. Micron should pass SK Hynix to become the second largest memory company in capex for the first time. Flash Ventures, a joint venture flash memory company between Toshiba and SanDisk (now part of Western Digital) should spend $3.5 billion.

The four largest foundry companies total 26% of projected 2016 capex. After TSMC, the next largest companies are GlobalFoundries at $3.0 billion, SMIC at $2.5 billion and UMC at $2.2 billion in capex. GlobalFoundries has lowered capex each of the last two years after peaking at $5.0 billion in 2014. China-based SMIC has been aggressively increasing capex averaging 50% annual growth over the last four years to hit $2.5 billion in 2016.

Other companies make up 23% of projected 2016 capex. This category includes major semiconductor companies such as Infineon Technologies, NXP Semiconductor (now including Freescale), Renesas Electronics, STMicroelectronics and Texas Instruments. As new wafer fabs have become more expensive (now costing several billion dollars) these companies are depending less on internal fabs and increasingly turning to foundries. Intel is an exception since it has a large economy of scale and sees its process technology as a competitive advantage. The memory companies also have economies of scale. In addition, the memory market is highly commoditized and price sensitive, making it difficult for a company to compete without its own wafer fabs.

The “other” category has been declining as a percentage of total semiconductor capex, from 39% in 2010 to 23% in 2016. The category will continue to decline in the future as capex is increasingly dominated by memory companies, foundry companies and Intel.

October 25, 2016

End-to-End Secure IoT Solutions from ARM

End-to-End Secure IoT Solutions from ARM
by Bernard Murphy on 10-25-2016 at 11:30 am
Categories: Arm, IoT, Mobile, Security

ARM announced today a comprehensive suite of solutions for IoT support, from IP optimized for applications in this space all the way to cloud-based support to manage edge devices in the field. Their motivation is to provide a faster path to secure IoT, from the chip to the cloud. One especially interesting component of this solution is a cloud-based software-as-a-service (SaaS) to manage, provision and update edge devices through a common platform. Simply put, ARM’s offering is about how little you now have to build or integrate yourself to get an end-to-end secure IoT solution up and running.

Before we go to the cloud, let’s start with what ARM is doing for edge nodes. First, they have introduced two new microcontroller cores: Cortex-M33 and Cortex-M23. These cores build on the ARMv8-M architecture and are the first in the Cortex-M family with TrustZone built-in. The M33 provides a lot of flexibility, with DSP and FPU on board and with a co-processor interface, yet is 80% smaller than the Cortex-A5. ARM anticipates that this platform will become the mainstream MPU for secure embedded. The M23 is 75% smaller still and 50% more energy efficient. To give an idea how low power this can be, think about pulling an insulin pen out of a holder. Sufficient kinetic energy can be harvested from this action to support battery-free operation.

TrustZone architecture, now available in these new M-class cores, provides similar capabilities to those available in other families. A Corelink SIE-200 fabric connects the processor to peripherals, mediating secure-world versus normal-world access under control of the processor which itself transparently time-slices between the two worlds with no need for programmer intervention. You get secure operation without needing an extra security CPU.

Cryptocell-312 adds the security resources required to build a trusted execution environment (TEE), through faster and lower-power cryptography performance. It also offers symmetric and asymmetric ciphers, hashing and random number generation, lifecycle management and root-of-trust controls, along with many more features. And it’s configurable so you can dial area and power down to address just what you need in your solution.

Another very important aspect supported in this series is secure debug. Cryptocell allows you to define and control a debug policy allowing differing levels of debug access in manufacturing, to the OEM and (per OEM grants) to field-deployment and maintenance teams.

Then there’s the Cordio radio. The latest release supports both Bluetooth 5 and 802.15.4 for ZigBee and Thread, covering the most popular choices for IoT. You can get the radio as a hard macro in TSMC 40LP/ULP or 55LP/ULP processes or in UMC 55ULP, or you can use the link-layer controller RTL and stack with a 3[SUP]rd[/SUP]-party radio front-end and process of your choosing. You can also have both Bluetooth and 802.15.4 in one Cordio-C50 macro with a modest increase in area and you can dynamically switch between modes. ARM mentioned that it was also feasible to operate Cordio on harvested energy, where appropriate.

ARM also offers all of this together in the pre-packaged Corelink SSE-200 subsystem: an ARMv8-M core, CryptoCell 312, the Cordio radio, memories and peripherals, all tied together with the CoreLink fabric and built on top of the Artisan IoT physical IP optimized to a low-power IoT use-model and targeted to the TSMC 40nm ultra-low-power process. That subsystem gets you a fast, low-power, secure and low-risk solution ready-made, allowing you to focus on adding your own special sauce.

Which brings me finally to mbed Cloud. A high security edge device isn’t very useful unless you also secure cloud-based management of those devices. Now think about trying to integrate a mix and match solution between multiple providers of devices and cloud access. I have a hard time imagining how you could avoid deploying a solution with security holes and power-wasting communication bugs. Third-party applications still have a role, but sitting on top of a secure, low-power foundation managed by one provider. ARM’s extension to provide the cloud part of this foundation through a SaaS solution is a new departure of course, but it seems to me unavoidable given security demands.

mbed Cloud has four major objectives: to be multi-cloud capable, to cover any device (not just ARM-based systems), to be very energy-efficient in management of devices and to secure every transaction. ARM acknowledge they are going to have to fold into legacy networks – devices, OSes, gateways and more, so the management solution has to span all of these. For connectivity mbed Cloud will communicate through CoAP, also OMA LWM2M, for provisioning it will take care of injecting security assets into a device and will manage access rights through the device lifecycle. And it provides fail-safe and secure update through broadcast and mesh-friendly packages.

Together with Mbed OS 5.2, mbed Cloud 1.0 has been announced at ARM TechCon 2016. The solution is already open to a number of lead partners in smart factory, industrial IoT, asset tracking and healthcare applications. ARM expects the release to be more broadly available in Q1 of 2017. The business model for cloud support apparently will be similar to other SaaS models – an OEM subscribes to just the features they use. You can learn more about ARM IoT solutions HERE.

Emergence of Segment-Specific DDRn Memory Controller

Emergence of Segment-Specific DDRn Memory Controller
by Eric Esteve on 10-25-2016 at 7:00 am
Categories: Cadence, IP

The semiconductor industry is served today by memory devices supporting various protocols, like DDR4, DDR3, LPDDR4, LPDDR3, GDDR5, HBM, HMC, etc. The trend is clearly to define application specific memory-protocols and in some cases, application specific devices. But developing many, and different, memory controllers IPs is resource and time consuming and not the best option for a vendor. For the chip-maker developing the System-on-Chip (SoC), the goal is to select memory protocol allowing integrating cost optimized memory devices, offering the best performance to cost ratio. If we look at the various, above listed, protocols, the DDR3 (DDR4) and LPDDR3 (LPDDR4) devices are offering by far the best cost/performance compromise. The DDRn or LPDDRn protocols support a wide range of applications, from low power mobile application processor to high performance, high bandwidth infrastructure application, like servers, storage or networking.

The question is how to define a unique memory controller which could be optimized to best support various applications like high-end consumer, mobile and infrastructure through parameterization. The memory controller IP is the most crucial piece of design in a SoC. If this IP fails, the SoC is simply not usable. That’s why the SoC chipmaker will take advantage of a unique memory controller design that is more robust, stable and easier to maintain by the IP vendor than a variety of hard macros. This paper summarizes a white paper from Cadence “Emergence of Segment-Specific DDRn Memory Controller IP Solution” and the technical data are related to Cadence’ memory controller IP products developed in 28 nm and 16 nm.

SoCs developed for networking applications requires the delivery of high bandwidth while running high performance computing and achieving large memory capacity. High bandwidth, along with large memory capacity and performance requirements, are expected to be directly translated to the memory controller IP and expected to deliver more data per cycle at the highest possible frequency. SoC targeting infrastructure segments have to provide a rich set of enterprise-class RAS (reliability, availability, and serviceability) features.

The protocols supported reduce to DDR3, DDR3L, and DDR4, as there is no need for LPDDRn support. The maximum data rate is 3200Mbps (note that overclocking is not supported in order to keep maximum data integrity and not impact the reliability). The data bus is set to 72 bits by default (it can be 16, 32, 40, 64 or 72 bits wide), and the address bus is set to 18 bits by default, allowing the user to access the largest possible memory space. Several features have been specified to best fit with the requirements of infrastructure applications, like DQ-to-DQS ratio (set to 4:1 compared to 8:1 in the other two configurations) to minimize the maximum skew between clock (DQS) and data (DQ). The memory controller supports per-rank-leveling (PRL) as well as write leveling for x4 DRAM to maximize data integrity, the goal being to optimize system reliability.

In the infrastructure segments, the CPU must use as much memory space as possible, and using dual inline memory modules (DIMM) is a must-have feature. The Cadence memory controller IP solution supports registered DIMM (RDIMM), unregistered DIMM (UDIMM) and load reduced DIMM (LRDIMM). In fact, these DIMM configurations are not supported in the other segments, the feature is infrastructure specific.

The white paper will tell you about the other two set of configuration features, defined for the mobile segment and for high-end consumer applications. Developing 100% application specific IP would be an ideal solution, but not realistic. Based on a unique architecture, this memory controller IP is highly configurable, this configurability allowing supporting the requirements of applications as different as servers/storage, mobile application processors or high-end consumer.

The white paper “Emergence of Segment-Specific DDRn Memory Controller IP Solution” is available on Cadence web site: http://ip.cadence.com/uploads/1102/wp-dip-ipnest-ddr-for-apps-final-pdf

By Eric Esteve from IPNEST

October 24, 2016June 14, 2019

FPGAs for a few thousand devices more

FPGAs for a few thousand devices more
by Don Dingee on 10-24-2016 at 4:00 pm
Categories: Aldec, Automotive, EDA, FPGA, IoT, Xilinx

An incredibly pervasive trend at last year’s ARM TechCon was the IoT, and I expect this year to bring even more of the same, but with a twist. Where last year was mostly focused on ultra-low power edge devices and the mbed ecosystem, this year is likely to show a better balance of ideas across all three IoT tiers. I also expect a slew of ADAS applications to hit the show.

The two IoT tiers besides the edge – gateway, and infrastructure – have room for bigger, more capable chips with either power-over-Ethernet, or wall power available. ADAS applications have vehicle power to work with, and while they have thermal restrictions limiting power dissipation, we’re also seeing larger chips to handle tasks like embedded vision, radar, and lidar.

Every time I bring up “IoT” and “FPGA” in the same sentence, people pounce. I get it, though my first response is the IoT does not equal edge sensors and actuators and mobile devices. FPGAs don’t fit the power profile of most edge devices, but with fog computing taking on a larger role things are starting to change.

Economically, we have the “a billion is the new million” problem, and the lower volume applications don’t make sense for custom silicon starts. Somebody still has to take care of those applications needing a few thousand devices. In the past, that was often a merchant microprocessor on a COTS single board computer with daughtercard mezzanines to customize I/O requirements.

We’ve also talked a lot about optimization making sense for IoT chip starts, and most FPGA designs don’t seem optimized versus an ASIC solution. Yet, these applications are ripe for solutions such as Xilinx Zynq, combining the benefits of dual core processing with programmable logic. For decades, FPGAs have succeeded at relatively low volume, heavily customized applications such as broadcast video solutions and defense signal processing. Industrial IoT solutions call for low to mid-range volumes in the gateway and infrastructure tiers.

Optimization is an interesting discussion. It gets really hard to optimize things when what you really need is flexibility. With specifications moving around, consortia merging, and market forces still not indicating a clear winner for industrial IoT solutions, FPGAs present an opportunity. Designs can be completed in programmable, accelerated hardware, fielded, and changed quickly to respond to the next customer requirement.

ADAS is a bit more complicated, because there are millions of cars out there and the volumes are attracting merchant chip starts. However, we are seeing the same fragmentation – he who owns the algorithms and the maps will ultimately win. Committing to a strategy, be it GPUs, CNNs, DSPs, or hardware-accelerated instructions, is expensive. It might win a particular customer and completely miss the wants of another. There are questions of differentiation and ecosystems and who is willing to make joint investment instead of demanding NRE.

Experimentation is rife in ADAS space. In a lot of ways, the algorithm scientists own the problem right now. This is almost the case for what John Bruggeman tried to pitch several years ago, where the silicon would self-organize around the software. We’re a long way from ASICs doing that, but development tools such as Xilinx SDSoC taking algorithms directly from C/C++ to FPGA hardware can approximate at least the compute intensive part of the solution.

One of the first press releases to cross my desk for this year’s ARM TechCon is from Aldec, parlaying Zynq technology into both ADAS and IoT applications. They are demonstrating two embedded development kits (EDKs) based on their TySOM family:

Their ADAS setup has their TySOM2 module plus an FMC with four camera interfaces streaming four First Sensor Blue Eagle cameras, complete with edge detection, colorspace conversion, and frame merging in programmable logic.
For IoT gateway applications, the TySOM1 is showing off MQTT and Amazon Web Services (AWS) integration with sensors of various protocols connected to the gateway. Aldec has been working with hardware-accelerated encryption for this platform, as well as adding more sophisticated vision sensors.

Also in booth #215, Aldec will be showing co-emulation using ARM Cortex-A15 fast models running SCE-MI. More on the Aldec presence at ARM TechCon:

Aldec to Showcase Xilinx Zynq-based ADAS and IoT Gateway Development Platforms at ARM TechCon 2016

Maker modules took the IoT world by storm because they are only twiddling a few bits with an MCU or dealing with a couple standard I/O ports off a mobile SoC. For the next wave of industrial IoT and ADAS applications, where customization and hardware acceleration of code are differentiators, Aldec and other Zynq-based module suppliers have a better formula.

October 24, 2016March 22, 2022

Making your AMS Simulators Faster (webinar)

Making your AMS Simulators Faster (webinar)
by Daniel Payne on 10-24-2016 at 12:00 pm
Categories: Cliosoft, EDA

I’ve been following Cadence Design Systems ever since it was formed in 1988 by the merger of SDA Systems and ECAD, Inc. At that time I was working at Silicon Compiler Systems, soon to be acquired by Mentor Graphics. ClioSoft is another company that I’ve known about for several years now, mostly for their design management tools that work inside of popular EDA environments like the Cadence Virtuoso system used by AMS designers.

Some of the challenges with AMS designs for IC teams today is that design engineers can be spread across multiple sites, even in different time zones or in different countries. With a time to market deadline looming, it can be difficult to properly communicate with all of the designers about which version of every IP block to be using on their project, when there can be hundreds of different blocks. Fortunately for us these two EDA vendors – Cadence and ClioSoft, have been working together on integrating design management into the Virtuoso environment.

There’s a webinar on Wednesday, October 26th at 10:30AM PST that you will want to attend if you use any of the Cadence tools, like:

Virtuoso ADE Explorer
Virtuoso ADE Assembler
Virtuoso Variation Option
Virtuoso ADE Verifier
Maestro View

Steve Lewis from Cadence will be talking about their analog design suite and how Virtuoso IC6.1.7 works in an IC design flow. Next up in the webinar is Karim Khalfan from ClioSoft to demonstrate how their SOS7 design management tools work inside of the Cadence Virtuoso environment. You’ll also get to see how Maestro View works and how the IC6.1.7 release has gotten quicker to use.

The SOS software from ClioSoft is used for both design and semiconductor IP management by hardware designers on an IC team. It’s kind of unique because it spans digital, analog, RF and mixed-signal designs. Your design teams can be in a single or even multiple design centers, then collaborate using automation on their projects.

About ClioSoft
ClioSoft was launched in 1997 as a self-funded company, with the SOS design collaboration platform as its first product. The objective was to help manage front end flows for SoC designs. The SOS platform was later extended to incorporate analog and mixed-signal design flows wherever Cadence Virtuoso[SUP]®[/SUP] was predominantly used. SOS is currently integrated with tools from Cadence[SUP]®[/SUP], Synopsys[SUP]®[/SUP], Mentor Graphics[SUP]®[/SUP] and Keysight Technologies[SUP]®[/SUP]. ClioSoft also provides an enterprise IP management platform for design companies to easily create, publish and reuse their design IPs.

Also Read

3 small-team design productivity challenges managed

Organizing data is first step in managing AMS designs

Webinar alert – helping mixed signal not be mixed up

October 24, 2016January 27, 2022

CEO Interview: Simon Butler of Methodics

CEO Interview: Simon Butler of Methodics
by Daniel Nenni on 10-24-2016 at 7:00 am
Categories: CEO Interviews, EDA, Perforce

It has been interesting to watch Methodics transform from an EDA company with their VersIC design management product to Life Cycle Management with ProjectIC, and now a Systems Company with WarpStor. Methodics was founded in 2006 by 2 ex-Cadence experts in the Custom IC design tools space, Simon Butler and Fergus Slorach. Today Methodics delivers state-of-the-art IP Lifecycle Management, Design Data Management, and Storage and Workspace optimization and acceleration tools for analog, digital, SoC, and software development design teams.

The term “IP” gets tossed around a lot, but it seems to mean different things to different people. How do your customers view the term “IP” and do you see the definition converging to any particular class?
“IP” and design re-use are closely related. Companies realize that the only way to meet new time to market demands and cost constraints is to be able to either reuse as much design as possible from previous designs, or purchase “IP” from third parties to meet these goals. Therefore, IP takes many different definitions depending on where it is coming from. It can be design data, software code, PDK’s, configuration files, documentation, hierarchical “blocks of blocks”, almost anything related to the design process. This is what the challenge is.. how can this disparate data be managed?

As companies adopt strategies that help them reuse their existing IP alongside 3rd party IP, are you seeing other methodologies that can help even further?
The biggest challenge is once you decide to re-use IP, you still have a configuration and connectivity issue. These IP blocks must work together. The problem is how to not lose the benefit of not having to redesign everything, only to spend the same time integrating the IP blocks. Companies are now starting to look towards “Platform Based Design” strategies, where IP is integrated before a new design starts into a platform that already works. To make this work, IP’s are designed to be plug and play into a common platform prior to be targeted towards a new design. Therefore, design teams are not downloading individual blocks that they must make work together, but a known good starting point of a functioning platform and can concentrate on any customization or new code development for the final design. This also simplifies product families within companies, because products are naturally grouped by the commonalities of IP used.

What challenges do you see companies need to overcome to realize these IP reuse and platform based design methodologies?
First, there has to be a change in mindset on what IP is… that “designing for re-use” is not a heavyweight methodology shift requiring additional work from designers to make happen. Configuration information, meta data, and related design artifacts need to be able to be easily maintained in order to facilitate adoption.

Also, the notion that there needs to be a major methodology change to make this happen needs to be dispelled. A system for facilitating IP reuse needs to be easy to integrate into existing design flows with little to no overhead.

With all the consolidation that is happening in the Semiconductor Industry, what impact do you see on the need to adopt IP reuse methodologies?
These mergers are being driven so that companies can maintain a healthy and competitive business. With companies merging to increase product portfolios, or to move to a more complete solution for their customers, they must create efficiencies in the product design flows. If a company doubles it product portfolio, or vertically integrates designs to provide a more complete system, you cannot lose business optimizations to a decrease in design productivity. Companies must be able to leverage all IP within the new organization in order to maintain efficiencies that were brought about by the merger. It is business critical to make sure the infrastructure is in place to facilitate design reuse throughout the new, post-merger organization.

What do you see as a requirement within companies to be able to effectively adopt IP re-use methodologies?
Companies need a collaborative platform that tracks the IP being created in the system, and how those same IP’s are being used by designers in multiple projects. There should be no differentiation between design data and IP, because any design artifact can be IP in another design. You should not limit your IP catalog to some static, manually maintained catalog determined by some librarian or IT person that does not have visibility into all designs, but allow designers to search all designs for possible IP and re-use candidates.

There are many solutions out there for semiconductor design data management and IP management, what makes Methodics unique?
Methodics has a system of collaboration that connects IP consumers to IP creators. It tracks the IP lifecycle in a project context that can be summarized in easily configured dashboards with all access to IP meta data. Any interested party has access to what IP is available, its state and quality, and how and where it’s used in other projects. Importantly, Methodics does not differentiate between design data and IP data – it is all treated the same and can be made accessible to anyone at anytime based on access policies and permissions. The IP management platform is lightweight and can be seamlessly integrated in design environments. With IP management in place, design decisions are more historically informed and contextually aware. Instead of being seen as a mandate that comes with a lot of overhead, “IP management” is a process that happens in the background and then becomes a guide to making better design decisions.

Also read:

CEO Interview: Charlie Janac of Arteris

CEO Interview: Marie Semeria of LETI

CEO Interview: Geoff Tate of Flex Logix

October 23, 2016

Foundry is Majority of KLAC Business!

Foundry is Majority of KLAC Business!
by Robert Maire on 10-23-2016 at 8:00 pm
Categories: Foundries, Semiconductor Advisors, Semiconductor Services

As we had projected, with KLA having the highest exposure to foundry/logic of any tool company, they are seeing the most near term strength as foundries (read that as TSMC) spend big for 10NM and 7NM. In addition the first tools you buy are yield management/metrology tools which KLA is the king of.

KLA put up numbers well above estimates….Generating $751M in revenue versus expected $733M and EPS of $1.16 versus street of $1.03. More importantly next quarter revenue is expected to be between $805M-$865M and EPS is expected to be between $1.28 and $1.48 this is way above street estimates of $770M and $1.19 in EPS

Is this to end or just begin? – Led Zep
We think KLA is at the beginning of a long run of strong demand to support both the 10NM and 7NM nodes. Industry expectations of 7NM being a “big” node like 28NM means a lot of equipment will need to be bought. Meanwhile 28NM capacity continues to be added. Unlike other tool companies where there seems to be investor concern about the sustainability of the current spending cycle, we think KLA is at the beginning …

Both Gen4 and Gen5…
KLA is seeing strong interest in both revamped versions of its Gen4 tools as well as its latest and greatest Gen5 tools. KLA is also seeing broad demand across its different product segments. We see no new significant competition in its core markets, and the company maintains its very strong market share as well as high gross margin that goes with that dominance

2017 could be a good year for KLA…
Given the strong start to the fiscal year coupled with good product positioning & mix as well as better foundry/logic demand we think KLA could be back on track to the strong performance it previously enjoyed before memory became so dominant in the market. While its clear that 3D NAND spend is still going strong we think the balance with foundry/logic will be more normal going forward and that helps KLA

The stock…
If we were to guess about a potential $6 EPS number for fiscal 2017 and then applied KLA’s historical 15X PE multiple to it , we get a $90 stock valuation which we think is well within a conservative range given KLA’s superior financial model and market dominance.

This obviously implies large potential upside in the stock, getting a nice dividend in the meantime doesn’t hurt either and likely limits the downside.

The KLA story has been hidden beneath the covers of the KLAM deal for the last year and we think as large, long only funds rediscover the name, we will likely continue to see strong steady improvement in the stock.

About Semiconductor Advisors
Semiconductor Advisors provides this subscription based research newsletter, Semiwatch, about the semiconductor and semiconductor equipment industries. We also provide custom research and expert consulting services for both investors and industry participants on a wide range of topics from financial to technology and tactical to strategic projects.

October 23, 2016

Foundry CAPEX Jumped from 17% to 37% of LAM Business

Foundry CAPEX Jumped from 17% to 37% of LAM Business
by Robert Maire on 10-23-2016 at 4:00 pm
Categories: Foundries, Semiconductor Advisors, Semiconductor Services, TSMC

Lam- in line qtr but guides above street over near term. As with ASML, foundry is driver with subdued memory, The Math implies biz peaking-Looking for DRAM in 2017.

Lam reported another great, record quarter, more or less in line with expectations with revenues coming in at $1.632B and shipments of $1.708B, generating EPS of $1.81. As we had previously predicted, forward guidance was off the charts with the December quarter revenues expected to be $1.84B +- $75M and shipments to be $1.85B +- $75M, generating $2.18 in EPS.

The company paid back some debt that was earmarked for the KLAM deal and will likely restart and potentially increase buybacks and/or increase dividends with some leftover cash. Foundry jumped from 17% to 37% of business, with memory down and logic flattish. The subdued memory likely limited upside in the just reported quarter and Samsung was likely slower than previous memory spend.

TSMC terrific….
Foundry spending was the big driver with 10NM/7NM being at the core and we are sure TSMC, the biggest foundry, is prepping to produce parts for Apple’s next Iphone next year. While foundry spending was up 25%, Lam said its foundry business was up 40% suggesting significant share gains and SAM expansion.

2017 will depend a lot on DRAM….
With 3D NAND and foundry continuing their strong pace the missing link is DRAM which saw a drop of 40% in spending this year. The most significant variable in spending outlook in 2017 is wether or not DRAM comes back. So far the signs look promising as pricing is good but we still wouldn’t count our chickens before they are hatched.

A new beginning (in New York)
Lam pushed back its analyst meeting , which was originally intended to be a KLAM celebration, back by two days and East by 2500 miles to New York. Much as Applied did after the failed TEL merger, we heard the new business model and targets set forth. We expect both a reset on the Lam business model as well as renewed returns to shareholders either through buy backs or dividends.

One issue we have is that its a bit of short time period to come up with a new plan and business model in 5 or 6 short short weeks after the end of the KLAM deal when planning for the KLAM deal went on for almost a year. We expect the real recovery to be more like 6 months or more to get fully back on track, much as we saw at Applied. But at least we will get an idea of the new strategic direction.

Running the numbers…
When we do the math on the guidance for the December quarter versus Lam’s expectations for the overall capex market next year it seems clear that the rate of growth will either slow or reverse. Much of the math is dependent on the state of DRAM and its recovery. Lam’s SAM has expanded greatly but we would likely to hear where the new SAM is coming from now without KLA, ….hopefully at the analyst meeting.

As we had previously predicted the next few quarters will be strong but investors will want to understand the longer term as fear increases that we are nearing a top because in previous cycles we saw a similar spurt of growth before a downturn started.

Predicting KLAC ….
If foundries were good for Lam, they will be fantastic for KLAC as they get a much bigger benefit from foundry/logic spending trends we are currently seeing. The reports out of both ASML and Lam confirm the current foundry ramp.

The stock…
Given the December guidance of $2.18 EPS, we are looking at a potential of a $9+ in EPS in 2017 , even if we flat line earnings. $9 in earnings is likely worth $110 a share or better but investors need to be comfortable that growth will continue and not top out or fall off in 2017 after several strong quarters. We are sure management will make the case at the analyst meeting….so far the track record has been good…

About Semiconductor Advisors
Semiconductor Advisors provides this subscription based research newsletter, Semiwatch, about the semiconductor and semiconductor equipment industries. We also provide custom research and expert consulting services for both investors and industry participants on a wide range of topics from financial to technology and tactical to strategic projects.

October 23, 2016August 9, 2020

What is the impact of missing the 7NM node with EUV?

What is the impact of missing the 7NM node with EUV?
by Robert Maire on 10-23-2016 at 12:00 pm
Categories: Foundries, Lithography, Semiconductor Advisors, Semiconductor Services

ASML reported a quarter that was slightly below expectations coming in at Euro 1.815B in revenues and Euro 0.93 EPS. Orders were a bit soft at Euro 1.4B but well within the normal quarterly variation of a lumpy business. Euro 28M was lost in a currency adjustment associated with the Hermes acquisition.

The guidance for Q4 was between Euro 1.7B and 1.8B with 47-48% gross margin. The company will ship 4 EUV systems for the year, rather than the 6 it had targeted, one unit slipped due to customer issues and one unit slipped due to ASML supplier issues.

Logic was an overwhelming 84% of business in the quarter but is expected to normalize to a better balance between memory and logic going forward.

A logic heavy quarter at 84% of business….
As we have mentioned in previous notes, we think part of the strength was due to both TSMC and Intel spending for 10NM. We had also mentioned our concern that there may have been a temporary hiccup in capex spending by Samsung due to near term cash issues related to the smartphone battery debacle. There is the possibility that some business may have shifted out of the quarter……

EUV remains slow-only 4 systems to ship rather than 6….
EUV continues to move slowly along without a significant change in the relatively slow pace. Concerns continue to be centered primarily on system uptime and availability. However there are still many ecosystems issues that have yet to be finalized as well including pellicles, resist, inspection, etc; etc;.

ASML continues to diligently plug away at the “moonshot” like project but customers are still not willing to bet their multi billion dollar production on a less than firm solution when they have a working , albeit more expensive, solution in multi patterning.

5NM seems to be the insertion point…
Given the ongoing EUV issues, it seems virtually everyone is pushing off the decision which means that 7NM will be multipatterning. The only exception may be Samsung which has made more noise about EUV but has slipped a bit in progress towards 10NM and 7NM (could the slippage be because they are trying to use EUV??).

Given where we stand right now it feels like 5NM is a better bet for EUV.

On the positive side, ASML has gone from 3 EUV customers to 6. Obviously the second tier chip makers are sensing that we are getting closer to EUV so they have to start getting ready as the learning takes several years to come up to speed.

One of the new customers is likely GloFo who is skipping 10NM to go straight to 7NM (which we think is a great decision). However, it seems as if GloFo is doing multipatterning for 7NM not EUV.

Is ASML missing 7NM with EUV a problem???
One of our growing concerns is that ASML EUV may miss a large node opportunity at 7NM. We have heard from many in the industry that there is a strong expectation that 7NM will be a very popular node much like 28NM, which is “the gift that keeps on giving” to the industry.

TSMC and others seem very focused on 7NM being a “big” node as compared to “Lite” nodes such as 22NM. GloFo seems to be betting the farm on it.

If 7NM goes as big as expected and it is only multipatterning then ASML will have missed a significant spending window as 5NM will likely be more of a “Lite” node.

7NM could be the last big node before the industry sees some titanic shift in the core process technology as we approach physical limits of Moore’s Law.

How does an 84% logic quarter impact other equipment makers?
If the rest of the industry follows the pattern of spending that ASML just saw (and it usually does)then we would expect other tool makers to see a similarly logic heavy quarter.

This is obviously a very strong benefit to KLAC which has lived through some lean years as memory ruled the roost. The fact that Gen 5 is now out when logic is ramping makes the possibility of strong potential upside performance. Yield management tools are in strong demand during the ramp period which we are in right now. TSMC needs to get its act together to have strong yields for next years Iphone and 10NM processor.

AMAT has historically had a very strong relationship with TSMC (TSMC is the house that AMAT built) and as such should benefit from increased logic spend we have been hearing about. AMAT has had a more equal mix of memory/logic business.

Lam has historically been much more memory centric and Samsung remains its biggest customer. Given that Samsung feels a bit weaker right now and Samsung logic has been slow , we would not be surprised to see near term weakness associated with this mix in logic heavy spending. Additionally , Lam has historically not had as much success at Intel as other competitors, so heavy spending in Q4 by Intel (up 40% Q/Q) will not benefit Lam as much as it does other players such as KLAC and AMAT.

The stock…
We think ASML remains fully valued in the near term and we have heard no breakthroughs in EUV that make us want to rush out and buy the share. The Hermes acquisition is on track and will obviously cause a bit of a dislocation as it is absorbed. We think ASML is overdone above $100 and would be more likely to look at the shares below $100.

October 23, 2016

What’s the Intel Capex Outlook?

What’s the Intel Capex Outlook?
by Robert Maire on 10-23-2016 at 7:00 am
Categories: Foundries, Intel Foundry, Semiconductor Advisors, Semiconductor Services

Intel has terrific QTR & slightly light guide Intel is recovering & transforming at the same time. Whats the Capex outlook? Impact on ASML KLAC LRCX?

Intel reported revenues of $15.78B and earnings of $0.80 for the quarter beating expectations and previous upward guidance. CCG (PCs) were up 21% Q/Q and 5% Y/Y. Data center was up 13% Q/Q and 10% Y/Y. IOT was up 20% Q/Q and 19% Y/Y. NVM was up 17% Q/Q and down 1% Y/Y. Capex for 2016 will come in more or less as expected at $9.5B +-$500M.

All in all, a very good quarter….outlook is for flattish revenues with slightly lower gross margin….slightly below street expectations.

Our quick takeaway is that Intel has been beating numbers handily and we think that there could be a bit of sandbagging especially with the introduction of a new CFO who isn’t going to want to disappoint his first quarter out of the starting gate, so we will see what the numbers finally come in at but we would bet that they will look better when Q4 is done.

Three quarters of above average Capex spend for three reasons….
The company talked about capex ticking upward for Q4 through Q2 of next year due to above average spending on three projects; 10NM rollout in Israel, 3D NAND in Dalian and 3D XPoint. Math suggests that capex could be $3.5B in Q4 as compared to an average run rate of $2.5B or so ( 40% above normalized run rate).

This perfect storm of spending will obviously help tool companies over the next several quarters. Given that Intels spend has been somewhat reduced, this blip, even though temporary, is a good shot in the arm to get these projects up and running

What wasn’t said is more interesting than what was said
It is interesting to note that Intel management did not even mention the word Israel or 10NM development in their prepared remarks. Also gone are comments on 10NM yield ramp and the associated “technology leadership” that Intel has historically touted. Could it be because TSMC has caught up to or passed Intel, with Samsung not far behind?

Part of the transformation of Intel is also transforming it from a technology and advanced production leader to more of an applications driven company. XPoint is an example of an application driven product rather than a Moore’s law driven product.

The de-focus away from Moore’s law leadership is quite clear as Moore’s law has also been missing from Intel’s recent vocabulary.

Results count towards a better stock price
Its hard to argue with success as Intel put up record numbers in what could have otherwise been a downward spiral of PCs. The restructuring though difficult will likely bear fruit going forward as well. It is not unreasonable to expect the stock hitting and breaking through $40 in the near future given our expectations of performance. The dividend doesn’t hurt either…

ASML- Waiting for 5NM…..maybe
As Intel backs away from pushing the limits of Moore’s Law, its clear that the need for EUV is also backing down (along with the alleged 15 unit order that drove ASML stock up huge…). Samsung seems the most committed to EUV but then again they are furthest behind in the race. We see EUV nowhere in sight at TSMC.

However, ASML will still do quite well with nice high margin immersion steppers.
We would expect them to also see brighter capex spending going forward.

KLAC – Gen 5 will be driven by 10NM and 7NM ramps
We expect KLAC to do very, very well with the current ramp of 10NM and 7NM and will be very well rewarded for its efforts on its new Gen 5 tools. Obviously Intel will buy a lot of tools, and we have heard that TSMC is ordering huge…

We think some of the share loss to E Beam will slow as it has run much of its course so the negative news is somewhat behind them.

KLAC will have some catch up to do as they were prepping to be acquired so they will have to step it up again and we could see increased spend after restructuring over a year ago followed by a fallow period of waiting to be bought.

LRCX- Forward guidance will make investors forget KLAM Kaput
We think Lam will put up pretty good Q3 numbers but will guide a very large (much better than expected) uptick in business over the next several quarters.

We would not be surprised to hear of either some pushouts or some business falling out of Q3 into Q4 as lam’s biggest customer, Samsung, may have shifted some spending due to near term cash issues related to exploding batteries. This would make the upside to future guidance look even better.

3D NAND remains the big driver. We would watch the gross margin line as competition may heat up in parts of the etch market. We have heard of some recent success in oxide etch by Semes ( a Samsung company in Korea) as well as an ongoing push by Applied in etch that may eat away at the edges. Rumor also has it that AMEC in China may have etch tools at Intel.

Lam still has its analyst meeting scheduled in November but now rather than a wedding celebration it will likely be a bit more subdued.

The stocks are feeling a bit “toppy”
The stocks have been doing very well, perhaps too well as they are feeling a little more like they are at the end of a strong run. Even though business is clearly very good and we think guidance will be great as well we wonder if that can keep the stocks moving or if they will take a bit of a breather after earnings.