Chip-equipment stocks get good news on two fronts

Semiconductor-equipment stocks were boosted by a pair of developments Wednesday, perhaps signaling the end of what's been a rough past year for the industry. Leaders such as Applied Materials and KLA-Tencor made substantial gains.

After falling to 52-week low last fall, chip-equipment stocks are now trading near their highs thanks to technology upgrades by leading chipmakers such as Intel Corp. (Nasdaq: INTC) and Motorola Inc. (NYSE: MOT).

It also helps that worldwide demand for chips used in PCs, communications appliances and network equipment is surging. So much so, that the Semiconductor Industry Association said Tuesday that total semiconductor sales are expected to reach about $140.8 billion in 1999, a jump of 12.1 percent over 1998.

That good news was compounded Wednesday when both Intel and Motorola said they will now begin using 300-millimeter semiconductor wafers, meaning chipmakers will need to order new equipment to meet the surging demand.

PRI Automation Inc. (Nasdaq: PRIA) shot up 5 9/16 to 33 5/8 Wednesday after Morgan Stanley Dean Witter upgraded the chip-equipment maker from an "outperform" rating to "strong buy."

Applied Materials Inc. (Nasdaq: AMAT) closed up 3 to 64 13/16 while KLA-Tencor Corp. (Nasdaq: KLAC) and Novellus Systems Inc. (NVLS) gained 5 1/4 and 4 a share, respectively.

By using large wafers in the manufacturing process, Intel officials hope to lower costs by 40 percent for each chip manufactured.

The larger wafer represents more than a doubling of the surface of the current 200-millimeter wafer. Intel also said it plans to start volume production of 300-millimeter chips using its 0.13 micron technology with copper in 2002, roughly a year after it begins 0.13 micron production on the now-standard 200-millimeter wafers.

PRI Automation shares hit a 52-week high of 44 5/16 in February after sinking to a low of 9 9/16 in October.

Ten of the 12 analysts following the stock rate it either a "buy" or "strong buy."