Intel's Focus On Memory Will Benefit These 5 Semi Equipment Names

Intel Corporation INTC raised its 2017 capex budget by 26 percent to $12 billion in their latest earnings call, with $2.5 billion earmarked for Memory expansion.

Intel's Relation With Others

Analyst Steve Mullane of BlueFin Research says Intel’s additional spending on Memory will benefit these five semiconductor equipment companies:

• Lam Research Corporation LRCX.
• Applied Materials, Inc. AMAT.
• ASML Holding NV (ADR) ASML.
• KLA-Tencor Corp KLAC.
• Nanometrics Incorporated NANO.

Commentary

Early January, Mullane said Fab 68 (China) was clearing fab room space to add 3D NAND capacity in the first half of 2017. Mullane now believes Intel plans to equip this facility to reach 50K wpm by the end of the year.

In addition, the analyst said the 26 percent increase in capex budget exceeded the expectations of most of the key semi equipment by approximately $2 billion.

“This additional $2 billion capex upside equates to an additional $1 billion–1.2 billion in Wafer Fab Equipment (WFE) spending and now increases our overall 2017 WFE spending model from 4–5 percent to 7–8 percent growth this year,” Mullane wrote in a note.

Rating, Justification

Mullane reaffirmed his Positive outlook on Intel given the Data Center/IoT/Memory story, 5G modem technology, stable PC market environment and the company’s strong process technology leadership.

The analyst believes Intel’s flat 2017 revenue guidance was conservative. The analyst also noted that his estimated 2017 PC shipment drop of 2–3 percent is 200–300 bps better than Intel’s view.

At last check, shares of Intel were down 0.60 percent to $36.60.