Applied Materials and NVIDIA correlation

Yesterday I listened to the quarterly analyst conferences for graphic chip maker NVIDIA (NVDA) and semiconductor equipment manufacturer Applied Materials (AMAT). You can see my summaries at:

Applied Materials (AMAT) Q1 Fiscal 2010 analyst conference summary
NVIDIA (NVDA) Q4 Fiscal 2010 analyst conference summary

One data point that matched up was that there is a shortage of key production capacity for semiconductor manufacturing. Nvidia described this as a supply constraint. This is called process technology, and it comes in generations, with less nanometers (nm) being better. 40nm is where Nvidia is at for process technology its newest chips.

The result was a great quarter for semiconductor equipment makers including Applied, which had revenues of $1.85 billion, up 21% sequentially, and up 39% from the year-earlier quarter.

The question for Applied is, how long can this last. Executives were cautious with their guidance, saying it is hard to predict the second half of 2010 at this point. The jump in the quarter that ended January 31 has a lot to do with manufacturers needing to make up for pent up demand. Remember the gloom and doom of January 2009? No one was buying manufacturing equipment; there was plenty of capacity. But designers like Nvidia expect a new generation of smaller chips about every 2 years. So their new products can't even be done on the older processes, which have plenty of capacity.

So two scenarios are possible. One is that with some extra equipment bought in the second half of 2009 and first half of 2010, manufacturers will be up to date on the newer technology. This assumes that the global economy, and in particular the consumer electronics segment of the U.S. economy, grows slowly in 2010.

I think the other scenario is more likely. Demand in nations like India, China, Indonesia, and Brazil will grow rapidly, and the U.S. will ramp moderately, rather than slowly. People are going to want the new smartphones, especially ones that use Marvell's chips to get prices under $125 in Asia. At the same time mobile pushes the small end of web presence, technologies like Nvidia's 3D Vision and AMD's Eyefinity will reinvigorate the large screen segment. Applied Materials makes equipment to manufacture large screen displays, so they should benefit.

All bets on technology involve risks. So ...

Keep diversified!

Will Apple Eyefinity?

For a technology industry person, I am not much on gadgets. I've played with an iPhone and it just made me want a bigger screen. If I shell out cash, it tends to be for better business functionality. I am not a traveling salesman. I work out of my home office. So I do like big, affordable screens. Currently I have a two-screen set up, both Acer screens, one 17", one 19". My graphics card is an ATI Radeon X1200, which a gamer would scoff at, but which is fine for business applications.

Apple (http://www.apple.com/) has been mainly about mobile trends for over a decade now. After blowing much of their consumer loyalty back in the late 1980's, they regained some of it with their portable computers, or notebooks, during the 1990's. Apple became important in the pocket-sized mobile space with the iPod introduction in 2001. Then, a couple of years ago, they took on the cell phone market with the iPhone. With their high-margin model, they have made a very successful business.

Their desktop computers, however, have continued to have low market share, if not as bad of a share as they had five years ago. The Steve Jobs magic spell just has not worked out very well there so far. The last time I had a moment of Apple computer envy was way back in the decade when a friend was working on an Apple desktop with a nice big screen. It made me want a Windows computer with just as big of a screen.

So what do I want, when my business capital budget can afford it? What I really want is an Eyefinity display.

An Eyefinity display consists of one of the newest AMD/ATI graphics cards and as many as six screens. Basically, absorbing your whole visual field. The technology is in its early days, and can only get better. I expect by the holidays of 2010 you will be able to buy integrated computer systems, with graphic cards and screens, at major retailers. Also, it is not a system you want to add to a single-core processor system, or even a dual-core system. It is a good reason to upgrade to quad-core. (I'm still at dual core, myself, using Windows Vista).

Unless Apple has decided to leave the desktop space to wilt on the vine, I can't imaging that Apple won't respond to Eyefinity. The sanest response would be to simply add Eyefinity to a Mac. Since the secret is the graphics card, Eyefinity can be added to Intel processor based systems. Right now Apple uses Intel processors with NVIDIA graphics. And certainly NVIDIA will eventually have a response to Eyefinity. So maybe Apple will just wait for that. I don't see Apple coming up with its own proprietary competitor. The choices seem to be do it AMD's way or do it NVIDIA's way.

Samsung and AMD demonstrated both three and six panel Eyefinity displays at CES earlier this month, with suggested prices of $1,899 and $3,099 for the displays. Eyefinity capable graphics cards currently include the 5970, 5870, 5850, 5770 and 5750, at a wide range of price points and capabilities. There is also a validation program to help consumers identify products that are Eyefinity compatible.

My AMD analyst conference summary page