Weekly Reads - March 6, 2023
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The launch of Applied Materials’ Centura Sculpta tool could have massive ramifications for the entire semiconductor manufacturing industry redistributing market share, economics, and competitive advantages.
ASML has had stranglehold on the EUV lithography market for years acting as the sole supplier of the most important piece of semiconductor manufacturing equipment. ASML’S EUV lithography tools use ultraviolet waves to print minuscule designs onto silicon wafers that will determine what the final chip will do. EUV lithography is required to make small powerful chips that go into electronics such as phones, computers, video game consoles, and automobiles. As the sole supplier ASML has benefited from unprecedented demand and pricing power with a typical EUV tool approaching $170 million in cost. Applied Material’s launch of Centura Sculpta is attempting to disrupt ASML’s market dominance by reducing the amount of lithography steps needed to prepare a wafer. Centura Sculpta in theory should eliminate the need to run EUV lithography multiple times (called double patterning) reducing errors, saving manufacturing time, and reducing energy costs for the foundry. According to a Reuters’ expert, eliminating just one lithography cycle can save up to $250million in capital costs for a foundry doing 100,000 wafers per month. If Centura Sculpta is widely adopted we could see ASML forced to decrease prices in order to protect market share from Applied Materials.
As more commercial satellites are launched into space there is a growing risk of collision between these satellites causing damage to billions of dollars of mission-critical assets.
The era of space exploration is leading to hundreds of new commercial satellites being launched into Earth’s orbit annually. Earth’s orbit is becoming far more crowded with both modern and legacy satellites increasing the risk of satellite collision. Many of these satellites that are orbiting Earth are decades old and have been out of commission for years since they cannot be repaired once they breakdown. These older satellites have become space junk and present a huge problem to currently used satellites that provide crucial functionalities such as navigation, text messaging, and internet connections. This problem could compound further with satellite collisions creating more space debris that adds more space junk into orbit further increasing collision risk. To tackle this growing issue world governments are working together to find ways to reduce the amount of space debris in orbit. One of these solutions is coming from Tokyo startup Astroscale which is testing a debris removal device called ELSA designed to latch onto defunct satellites and drag them toward Earth’s atmosphere so it can burn up and be disposed of. Even large aerospace companies including Northrop Grumman, Maxar, and Airbus are taking notice of this growing issue and are working on deploying service satellites to latch onto broken or fuel-spent aircrafts to extend their lifespan. With more and more satellites predicted to launch in the next decade and space exploration popularity rising the issue of space junk is becoming more pressing leading to new business opportunities for aerospace incumbents and startups across the globe.
In a world of declining brick and mortar retail, Dillard’s continues to buck the trend focusing on strong inventory management and crafting positive in-store experiences.
Shares of Dillard’s have shot up more than 1,500% since April 2020 trouncing tech darlings Amazon and Tesla through that period. Dillard’s, a department store, has continued to grow same-store sales and margins despite various retail headwinds. While many retailers focused on survival during the peak of COVID, Dillard’s focused on inventory control and cost management coming out of COVID a much stronger retailer. With many department stores having to cut prices via discounts and promotions to move inventory over the last few years Dillard’s has done a superb job in avoiding discounting and positioning themselves to serve higher income demographics. These strategic moves have allowed Dillard’s to stabilize revenues and margins and return capital back to shareholders via share repurchases. The company has committed over $1 billion to share buybacks in the last 5 years while maintaining a clean balance sheet. Dillard’s strategic playbook has been stellar throughout the last few years but questions remain whether growth and margin trends are sustainable moving forward. Many Dillard properties remain mall-based which continues to be a declining retail market and store closures of these properties are likely to continue. Demographic changes also pose a threat with younger demographics preferring to shop online or in trendier retail formats. While the last three years brought healthy returns to shareholders there remains an uphill battle for Dillard’s to sustainably grow revenue and margins long-term.