Analyst clubs Cymer on Gigaphoton’s US gains

Jan. 3, 2008 – Laser light source manufacturer Gigaphoton has made major inroads into US semiconductor manufacturers, enough to cause at least one analyst to sound the alarm for competitor Cymer Inc.

Banc of America analyst Mark Fitzgerald lowered his EPS estimates down 15% to $2.28, and the stock price to $35 from $40, saying his industry checks indicate Gigaphoton has made significant strides in domestic business, nailing down sales at Samsung’s Austin, TX facility. It’s also likely won future business at Intel, possibly up to 20-30 KrF systems over the next two years, as well as smaller business at IBM.

Fitzgerald writes that Cymer’s lead in the ArF segment (Intel will still use CYMI for ArF lasers) isn’t enough to justify premium pricing, and the company has cut prices on its XLR lasers recently to maintain marketshare, and margins likely will hurt reflecting the weaker pricing, according to a summary posted by Notable Calls, a self-professed “anonymous Wall Street professional” blogger (linked from Seeking Alpha. Cymer does have a lead in EUV lasers but that’s still a small market with faraway production inroads (~2011, if then), with 5X tool costs vs. excimer lasers, according to Forbes’ take on Fitzgerald’s research note.

The Cymer-Gigaphoton battle is nothing new, but the threat posed by Gigaphoton had been manageable so long as its business was kept at arms’ length to regional customers in Asia (including Samsung), notes Notable Calls. “But the wins at Intel and IBM is where the real pain begins,” he writes, adding that “Gigaphoton already has deals in place with ASML and it looks like pricing will suffer going forward.”

Cymer shares sunk to a two-year low on Thurs., finishing down about 8.4% to $34.96.


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