Zachary (Zoujia) Chen Justin Craigwell- Graham Charles Gambino Vignesh Murali Jacob Rapp November 12, 2009 http://www.memc.com/index.php? view=MEMC-History
Feb 12, 2016
Zachary (Zoujia) ChenJustin Craigwell-GrahamCharles GambinoVignesh MuraliJacob Rapp
November 12, 2009
http://www.memc.com/index.php?view=MEMC-History
Company Overview• MEMC Electronic Materials, Inc. is engaged in the design, manufacture and
sale of silicon wafers
• Based in St. Peters, MO
• 4600 Employees
• Produces both semiconductor wafers and solar wafers
• One of four wafer companies with 10% or more of the market share.
• Strategy: “Continuous improvement of technology, market share, and profits.”
• NYSE Ticker: WFR
Company History• Founded in 1953
• 1995: IPO on NYSE under the ticker WFR
• 2001: After almost filing for bankruptcy, Private Equity Firm Texas Pacific Group acquires 72% of the company
• October 2009: MEMC acquires SunEdison LLC
What is a wafer?
• Wafer’s are the foundation on which the world’s semiconductors and solar cells are built
• All the processes of a micro device are conducted on a wafer
• Wafer sizes have increased device performance and reduced production costs 50mm, 100 mm, 150mm
and 200 mm wafer
What is a Wafer?
Source: MEMC 10K
Global Manufacturing
SunEdison LLC Acquisition
• SunEdison develops solar power projects and is considered a major solar energy services provider in North America
• Reiterates Management goal to focus product mix towards the solar energy division
• $25 million in sales in 2008
Competition• Main Competition
– Solarworld AG: Solar Energy company who also makes semi-conductors based in Germany
– Kyocera: Based in Japan. Products range from Ceramic components to electronic devices, equipment and networks
– SUMCO: Based in Germany, makers of semiconductor and solar cells
Semiconductor and Solar Industries
• These two markets (semiconductor and solar) are evolving and devices are getting more specialized and high-performance.– Silicon wafers are becoming more and more critical to the performance of
these devices.
• Industry is seeing consolidation & segmentation – four major suppliers
• Industry has suffered massive decrease in prices due to decrease in demand and oversupply of wafers as well as polysilicon used to make solar cells
– WFR has had to renegotiate contracts at lower prices
• Demand in solar industry driven by government incentive– Cost of solar power today exceeds cost of power from electric utility grid– Demand correlated with price of other energy sources
Semiconductor Device Industry Risks
• Rapid technological change• Product obsolesence• Changes in product mix• Price erosion• Fluctuations in product supply and demand
Macroeconomic Outlook• A depressed global economy has limited nations
especially US, Japan and Germany from investing in solar energy. Subsidies have reduced.
• Companies lacking the subsidies will invest in other cheaper energy sources
• Short term demand for electronics and semiconductor equipment gloomy as companies hesitate to invest in fixed assets
Dupont Analysis
SWOT • Strengths
– International diversification– Contracts at full capacity for future– Diversified between poly-silicon and solar
wafers to reduce cyclicality risk
• Opportunities– Emerging markets– Consumer’s desire to “Go Green”– Rising costs of conventional forms of
energy
• Weaknesses– Dependence on single and limited source
suppliers– Dependence on both the solar AND
semiconductor industry– Unable to easily transfer production of
specific products between manufacturing facilities
• Threats– Subject to both semiconductor And solar
industry risks– Investments of substantial cash balances
in auction rate securities, fixed income funds, individual corporate bonds, pension plan assets, and asset-backed and mortgage-backed securities.
Management Performance• What Management Said Would Happen:
1. Reduction in manufacturing and operating costs from 2006 levels2. Our belief that our capital expenditures will be approximately 15% of our
net sales in 20083. Company will continue to possess sufficient liquidity to avoid problems with
the tight credit and capital markets
• What Happened: 1. COGS, SG&A, and R&D expenses as a percentage of sales fell from 2006
levels2. Capital Expenditures were 15.13% of net sales in 20083. Quick Ratio has hovered around 3.0x since 2006
Assumptions for Pro FormaRevenue Source 2009E 2010E 2011E 2012E 2013E 2014E 2015ESemiconductor -50% 2% 5% 10% 8% 8% 8%Solar -50% 2% 7% 8% 8% 10% 10%Sales of excess Polysilicon -2% -2% -2% -2% 0% 0% 0%Total Revenue Growth -40.9% 0.7% 3.7% 5.6% 5.9% 6.9% 7.0%
Cost Assumptions by Year 2008 2009E 2010E 2011E 2012E 2013E 2014E 2015E
COGS/Sales 49.87% 75.0% 66.0% 58.0% 54.0% 52.0% 52.0% 52.0%
SG&A/Sales 5.58% 6.0% 6.0% 6.0% 5.5% 7.0% 5.5% 5.5%
R&D/Sales 2.00% 3.5% 3.5% 4.0% 4.0% 4.0% 4.0% 4.0%
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