Lam Research Corp. will be the first semiconductor equipment maker to report earnings and Wall Street is cautious.
Lower spending from makers of memory chips due to elevated inventories has reduced estimates for equipment sales next year and a recovery isn’t likely until the second half of 2019, according to Evercore ISI analyst C.J. Muse.
Makers of machinery used in the production of semiconductors have benefited from a chip boom in the last few years but their stock prices have fallen in 2018 as customers have reduced spending.
“We see a material reset” coming for companies such as Lam Research, Applied Materials Inc. and KLA-Tencor Corp., Muse wrote in a note.
Applied Materials, the world’s biggest chip equipment maker, has tumbled 45 percent since a record high in March. That’s been a source of concern for investors in the broader chip industry given that orders for the expensive gear have historically been a leading indicator for the whole electronics supply chain. The broader Philadelphia Semiconductor Index is down 13 percent from a March record.