What's The Deal With Semiconductors Now? Summit's Sundararajan Digs Into The Sector

In a report published Thursday, Summit Research analyst Srini Sundararajan reviewed companies that have reported earnings in the Semiconductor space and commented on key takeaways from Analyst Meetings.

Intel: Looking Cash Strapped?

Sundararajan noted that Intel Corporation INTC exceeded both its earnings per share and revenue expectations in its quarterly print and also lowered its capital expenditure budget to $7.7 billion. The analyst is wondering if Intel is "beginning to look cash strapped."

Sundararajan said Intel also remains a "free cash flow machine through profligate spending on peripheral items" which include: 1) its investment in ASML Holding NV (ADR) ASML which the company can sell to finance its "mammoth" Altera Corporation ALTR, 2) a "barely satisfactory" McAfee investments, 3) stock buybacks and "high" dividends, and 4) investments in wearables.

The analyst concluded Intel's past behavior may suggest "process dominance has become a second priority" and whether this spending includes a "strategically important" Micron Technology, Inc. MU stake through Intel's Tsinghua investment is "anybody's guess."

Related Link: Thoughts On Reported Micron Bid From The Analyst Who Predicted It First

ASML: Continues To Make Progress

Sundarajan stated that ASML's forecasted C3Q sales of 1.5 billion to 1.6 billion euros and a C4Q revenue that will be "at least as strong" implies a full year revenue guidance of $6.3 billion to $6.5 billion. The analyst pointed out that midpoint of this range exceeds the consensus estimate of $6.3 billion.

Sundarajan also commented that while he remains "concerned" over the EUV ecosystem, the company continues to make progress in achieving a viable EUV scanner.

Taiwan Semiconductor: Smaller Share Of Apple's A9 Budget

According to Sundararajan, Taiwan Semiconductor Mfg. Co. Ltd. (ADR) TSM is expected to have "the smaller share" of Apple Inc. AAPL's A9 budget.

The analyst expanded that it is possible the company would only be contracted to fabricate chips for the iPad only. In addition, Taiwan Semiconductor "seems to be having difficulty" filling up its fabs with possibly a 50 percent utilization level.

Semicon Analyst Meeting Takeaways

• Applied Materials, Inc. AMAT hopes for a "reach-out" to $2.0 in earnings per share by 2018.
• The "main takeaway" from meeting with Lam Research Corporation LRCX was the company's forecasted revenue for the second half of 2015 will be "equal to or better" than the first half. The second takeaway was that the company does not expect any "loss of momentum" for its products post introduction of EUV.
• KLA-Tencor Corp KLAC suggested that for CQ2 its revenue, earnings per share and shipment performance will be "in-line." The company also positioned Gen 5 as an alternative to Hermes Microvision but the analyst believes that "the sticker shock of the Gen 5 will not make it much of a success versus Hermes."