Overweight Semiconductors

Piper Jaffray released its industry note today on semiconductors and highlighted some of the manufacturers they track. Altera (ALTR) is rated Overweight. Our $48 price target is based on 18x CY11E EPS. Risks for Altera include: 1) reliance on foundries for wafer production, 2) competition 3) fluctuations in end demand, 4) and cyclicality. ASML Holding (ASML) is rated Overweight. Our $49 price target is based on 13x 2011 EPS of $3.80. Risks for ASML include industry cyclicality, reliance on a few key suppliers, and customer concentration. The risk to ASML is the use of maskless lithography such as imprint lithography or e-beam lithography below 16nm. The lithography road map challenges are looming on the horizon and could have negative consequences for the share in the 2013 to 2015 time frame Atheros (ATHR) is rated Overweight. Our $38 price target is based on 18x CY11E EPS. Risks for Atheros include: Speed of transition to 802.11n technology, PC industry unit demand, and timing of ramp of embedded 802.11 design wins. Nanometrics (NANO) is rated Overweight. Our $24.50 price target is based on 12x CY11E EPS. Risks for Nanometrics include, but are not limited to: 1) industry cyclically, 2) customer and memory market concentration, and 3) expected share gains. Silicon Labs (SLAB) is rated Overweight. Our $46 price target is based on 21x CY 2011E EPS of $2.20. Risks for Silicon Labs include: FM tuner market share declines and slower-than-expected ramp of design wins.