San Diego Union-Tribune (Sunday)

CHIP SUPPLY CRUNCH HAS UPSIDE FOR SOME FIRMS

- BLOOMBERG NEWS

The sudden shortage of semiconduc­tors disrupting auto production and limiting revenue growth for Apple has created a stock market boon for the makers of chip production equipment.

Those companies have emerged as the biggest winners from the supply crunch as chipmakers rush to add more factory capacity. Applied Materials, the world’s biggest equipment maker, has seen its shares advance about 40 percent this year. Stocks of Brooks Automation, Lam Research and KLA Corp. have also been rising.

Expanding equipment budgets by major chipmakers and government­s concerned about foreign dominance of production facilities are giving Wall Street increasing confidence that the rally has staying power.

“Over the next three to five years, this is definitely very bullish for semicap equipment in terms of overall tightness and focus on domestic supply,” said Krish Sankar, an analyst with Cowen & Co.

The shortfall is a problem that seemed unthinkabl­e a year ago when a rapidly spreading COVID-19 virus sent economic activity plummeting as companies began efforts to reduce production in anticipati­on of ebbing sales.

Instead, after an initial shock, sales in many industries surged and companies scrambled to boost inventorie­s.

Many chipmakers are now producing at maximum capacity and government­s are suddenly looking at a dearth of homegrown plants as a national security risk.

President Joe Biden signed an executive order last month to review the country’s supply chains for semiconduc­tors and other products. While there aren’t expected to be any quick fixes, industry watchers say the long-term trend is clear: more equipment will be needed.

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