LRCX: Citi Ups To Buy, Sees Samsung Boost To Spending

Quote: By Tiernan RayCitigroup’s Timothy Arcuri this morning raised his rating on shares of Lam Research (LRCX) to Buy from Sell, and raised his rating on shares of KLA Tencor (KLAC) and ASML Holding (ASML) to Hold from Sell, writing that a “sudden and meaningful order pullback” in chip equipment has lessened the risk for the group. Lam shares are down more than 20% in recent months, he notes, and the company can benefit significantly from new orders coming from Samsung (SSNLF). “Our latest checks indicate that Samsung has made its decision to bring back a large portion of the pushed-out shipments in CQ3,” writes Arcuri. “The decision is largely based on the company’s view that memory pricing/demand is likely to bottom in July and start to pick up in August with back-to-school and holiday season coming up.” Samsung is planning to place orders for its Line 16 NAND manufacturing line, its Line 15 DRAM line, and a “copper interconnect fab” to go with it, writes Arcuri. Arcuri adds that new orders for Samsung’s foundry and logic business remain on hold at “Line 14,” and probably will until Samsung resolves its legal disputes with Apple (AAPL), “although we do note that our Samsung analyst, Henry Kim, believes Samsung has secured some contractual obligation from AAPL through at least A6 processor and likely even A7.” For the industry overall, order levels have become less challenging, he thinks. We estimate that overall industry WFE run rate is down to ~$27B in CQ2. This is meaningfully below the $32-33B expected for all of 2011 by most equipment companies and now even below the $29B we consider “normalized” WFE. This is shown in Figure 1. Arcuri thinks some of the good news may start to appear at the Sem...
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