In line with its plans announced earlier on its conference call,
Maxim Integrated Products Inc.
is injecting $200.0 million into its four wafer fabrication
facilities in Beaverton, Oregon; Dallas and San Antonio, Texas; and
San Jose, California.
While Maxim did mention that the funds would be used for
upgrading and modernizing its facilities, it did not specify how
long this would take. However, the company expects fourth quarter
capex to skew expectations for 2012 while capex for 2013 remains
within the guided range. This seems to indicate that most of the
charge will be taken in the fourth quarter itself and any
additional expenditure will be spread out evenly over time.
Maxim's exposure to fast-growing markets, such as smartphone,
tablets PC, factory-automation equipment and automotive requires
the company to stay abreast of technological advancements. The
level of innovation in these markets is typically very high and
product cycles are short. Therefore, it is very easy to lose a
socket (miss a design cycle), which could result in significant
losses for the company.
Therefore, Maxim's decision to replace old machinery with
next-generation equipment, upgrade its process technology, move to
newer technology nodes and consolidate production from recent
acquisitions comes at the right time. We believe that this
initiative is likely to improve Maxim's competitive position versus
peers such as
Linear Technology Corp.
Texas Instruments Inc.
), among others.
As per research conducted by IDC, the global semiconductor
market grew 3.7% to $301.0 billion in 2011. Further, the market is
expected to grow 6-7% this year. Estimates provided by
Databeans indicate that the analog segment of the market
contributed over $42 billion, or 14%. Maxim was the fifth largest
player in the segment, with a 4.8% market share, having grown
around 4% from 2010.
In the third quarter of 2012 (the last-reported quarter), Maxim
posted revenue of $571.2 million, down 3.4% sequentially, 5.9% year
over year and within management's guidance range of $555.0-585.0
million. Revenue was down across all end-markets except industrial,
which was flat sequentially.
Currently, Maxim Integrated Products Inc. has a Zacks Rank of
#3, implying a short-term Hold recommendation.
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