Q4’18 and 2018 Equipment Supplier Summary – AMAT Leads as Market Falls

Q4’18 equipment supplier financial data is often not released until the last day of March in Korea which causes a delay in releasing our aggregated look at quarterly results for equipment suppliers in our Quarterly Display Supply Chain Financial Health Report. So, finally, we have the financial data for 22 equipment companies covering company revenues, display equipment revenues, bookings, backlog and more. As shown below, it was a down quarter from record Q3’18 results for display capex, total display equipment spending and display equipment revenues for the 22 companies (21 after the merger between Wonik IPS and Wonik Tera) we follow. ​

• Total display capex was down 25% Q/Q and 20% Y/Y to $8.2B;
  
• Total display equipment spending was down 37% Q/Q and 9% Y/Y to $4.6B;
  
• Results for the 22 companies we follow were down 27% Q/Q, but up 5% Y/Y to $2.7B.
  

Some of the differences between these growth figures can be attributed to spending on fabs/cleanrooms vs. new equipment and revenue recognition differences between our equipment spending report and actual company results. In any case, it was a down quarter. In this quarter’s report, we added Nissin Electric and KC Tech and removed Orbotech from the growth calculations since their Q4’18 data was not made available. 

Display Capex, Equipment Spending and 22 Company Results

Source: Quarterly Display Supply Chain Financial Health Report

For Q4’18:

• Applied Materials had the highest revenues at $507M and an 18.6% share of these 22 companies. Its revenues fell 28% Q/Q but were up 11% Y/Y. As shown below, it beat consensus on company revenues and net income. For all of 2018, also shown below, it was #1 in Q1’18, Q2’18 and Q4’18, and thus rose from #2 to #1. Its revenues rose 32% Y/Y to $2.55B and a 20.6% share, up from 15.2%. Applied gained share due to its strong position in both LCDs and OLEDs and the introduction of new equipment.
• Canon’s estimated display equipment revenues fell 54% Q/Q and 6% Y/Y in Q4’18 to $444M and a 16.2% share. The slowdown in mobile OLED spending is impacting Canon and their revenues for all of 2018 fell 13%. As a result, they fell from #1 in 2018 to #2 in 2018 with their share falling from 20.7% to 18.6%. For Q4’18, it missed on the top line and beat on operating income and net income.
• Nikon was #3 in Q4’18 revenues and for all of 2018. In Q4’18, their estimated litho equipment revenues rose 13% Q/Q and 52% Y/Y to $358M on growth at 10.5G fabs where their tools sell for a significant premium. Gains by 10.5G fabs also boosted 2018 share with revenues rising 32% Y/Y and their share rising from 8.1% to 11.1%.
• Tokyo Electron (TEL) had a down quarter in Q4’18 on a 24% Q/Q decline, but enjoyed rapid growth through the year. Its Q4’18 revenues were up 76% Y/Y and revenues rose 81% for all of 2018 to $1B. As a result, it rose from #8 to #4 in 2018 as a result of high share at 10.5G fabs in both coater/developers and dry etch.
• SFA Engineering maintained its #5 position in both Q4’18 and for all of 2018 with its line-up of OLED frontplane, module and automation equipment. Q4’18 revenues were down 8% Q/Q, but up 25% Y/Y. For the year, lower spending by Samsung and lack of OLED evaporation business resulted in a 21% Y/Y decline in revenues.
• For all of 2018, ULVAC fell from #4 to #6 on a 14% decline, V-Technology rose from #9 to #7 on a 38% gain helped by 10.5G CF litho sales and AP Systems fell from #6 to #8 on slower mobile OLED spending resulting in a 26% decline.
• Toptec experienced the largest revenue decline for the year at -85% causing its ranking to fall from #6 to #16. It had a dominant position in lamination equipment for curved OLEDs which resulted in strong sales to Samsung Display. However, other panel suppliers have not adopted it to the same degree and Toptec employees were recently accused of selling secrets regarding this technology to BOE. As a result, their Q4’18 revenues were off 31% Q/Q and 67% Y/Y.
• In summary for Q4’18 vs. consensus, there were 10 misses on the bottom line vs. 4 beats. For operating income, there were 6 beats and 4 misses as companies are becoming more efficient. For net income, it was evenly split between misses and beats. 

Q4’18 Display Supplier Equipment Revenues and Growth

Source: Quarterly Display Supply Chain Financial Health Report

Q4’18 Results vs. Consensus

Source: Quarterly Display Supply Chain Financial Health Report

2018 Display Equipment Share and Growth

Source: Quarterly Display Supply Chain Financial Health Report

This report goes beyond just revenues and compares each company’s:
 

• Gross Margins
• Operating Margins
• EBITDA Margins
• Pre-tax Margins
• Net Margins
• Display Backlog
• Total Backlog
• Display Bookings
• Total Bookings
• Inventories
• Debt/Equity and Net Debt/Equity
• Operating Cash Flow
• Free Cash Flow
• And more

 
Highlights of what we saw for Q4’18 were as follows:

• Margins were down slightly on lower growth in both display and semiconductor equipment;
• Canon had the highest gross margins followed by AMAT, Jusung, Nikon, TEL and V Technology. Gross profits were down for the 3rd consecutive quarter. Toptec had 0% gross margins.
• Looking at display equipment operating margins, V-Technology had the highest margins at 29% followed by Nikon, AMAT, ICD and TEL. 3 companies had negative operating margins in Q4’18 vs. just 1 company last quarter.
• EBITDA only fell 1% Q/Q and 8% Y/Y with EBITDA margins flat at 18%. V-Technology had the highest EBITDA margins at 20% followed by AMAT, ICD, TEL and Coherent (included just in the financial comparisons).
• Net margins fell from 12% to 11%, but were up significantly vs. 6% a year ago. ICD had the highest net margins followed by AMAT, V-Technology, SNU Precision, TEL, Viatron and Jusung. Interesting to see more Korean companies higher up in the rankings.
• Display backlog was published for 10 companies and fell 11% Q/Q and 5% Y/Y to $2.35B. V Technology had the highest backlog. AVACO had the highest increase on orders from LGD.
• Display bookings were also published for 10 companies. It fell dramatically, down 61% Q/Q and 50% Y/Y as the equipment market slows down. The biggest declines were at Toptec, ULVAC, SCREEN and V-Technology, all down over 50% Q/Q. Bookings rose at AP Systems and Jusung with Jusung winning business at LGD.
• Operating cash flow fell 2% despite a large season increase at Canon. This was due to a large negative result for Tokyo Electron as well as negative results at Wonik, Jusung, AVACO and ULVAC.
• Free cash flow went negative, falling from $1.7B to -$204M as the result of Canon paying off ~$750M in debt which reduced its free cash flow from +$144M to -$678M. AMAT led in free cash flow for the 2nd straight quarter, Nikon experienced a large increase in free cash flow to rise to #2 as its business rebounds helped by 10.5G litho tools.  

Display Equipment Supplier Margin Summary 

Source: Quarterly Display Supply Chain Financial Health Report