4 Chip Equipment Companies That Could Benefit From Big 2016 Spending

Technology

Published: December 28, 2015 11:20 am

Last Updated: January 13, 2020 3:40 pm

As the year winds down, technology investors are casting an eye toward 2016, and what hopefully will be a busy year for the top semiconductor capital equipment companies. With the battle among chip makers growing in the competitive dynamic random access memory (DRAM) and 3D NAND areas, raising capital expenditures could bode well for some of the top chip equipment companies.

In a new research report, Stifel feels that Micron Technology could be forced to increase capital spending next year in an effort to catch up to Samsung in both leading edge DRAM and 3D NAND. In fact, the Stifel team raises their capex forecast for Micron to $5.4 billion from $5.0 billion, and four companies in the firm’s coverage universe rated Buy look like they will have the best exposure to the increase in spending.

Lam Research

This remains one of the top chip equipment picks across Wall Street. Lam Research Corp. (NASDAQ: LRCX) designs, manufactures, markets, refurbishes and services semiconductor processing equipment used in the fabrication of integrated circuits (ICs). The company offers plasma etch products that remove materials from the wafer to create the features and patterns of a device. Many Wall Street analysts have highlighted the company and its peers as having a significant equipment opportunity from the NAND evolution as well. Lam Research also appears well positioned to gain share in the wafer fab equipment market, driven by a strong focus on technology inflection spending over the next few years.

Despite so-so foundry and logic spending, many on Wall Street think that this company will also continue to benefit from technology transitions such as FinFET, 3D NAND, multi patterning and advanced packaging in 2015 and beyond. Many analysts believe it is the “cleanest” semi cap story, benefiting from cyclical tailwind, SAM expansion and share gains.

Lam Research investors receive a 1.5% dividend. The Stifel price target for the stock is $93. The Thomson/First Call consensus target is $91.65. Shares closed most recently at $80.39.