Deutsche Bank Comments on Read-Through from TSMC's Capex Cut (AMAT) (LRCX) (KLAC) (TSM)

Deutsche Bank analyst Sidney Ho discussed read-through from TSMC's (NYSE: TSM) capex cut in a research Thursday. Companies mentioned in the report included Applied Materials (NASDAQ: AMAT), Lam Research (NASDAQ: LRCX), and KLA-Tencor (NASDAQ: KLAC). All three stocks traded lower intraday.

Ho explained, "One day after Intel cut its capex forecast by $1.3bn, TSMC lowered its capex budget for 2015 by $1bn, from $11.5-12.0bn to $10.5-11.0bn ... We believe TSMC's capex cut is well telegraphed as the company made comments about a month ago that there could be some re-use of tools for 16nm production. The $1bn capex cut is roughly in line with our expectations."

"Capex cuts are clearly negative for semicap companies, and AMAT/KLAC have higher exposures to logic/foundry customers than LRCX. That said, we continue to believe the market has already priced in a lower WFE spending level, as evidenced by AMAT/LRCX/KLAC stock prices which all reacted positively yesterday following Intel's capex cut that was larger than we expected, and ASML's cautious comments. As such, we believe further downside risks to AMAT/LRCX/KLAC are limited from the current level," added the analyst.

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