>>1) Skeeter's comments about rapid ramps in CapEx appear to be correct, but only to a
point. As a former equipment analyst (at H&Q and Bear, Stearns), I pay close attention
to equipment spending. In fact, I operate on the assumption that the typical viewpoint is
90-degrees wrong - semiconductor industry performance doesn't affect capital spending
nearly as much as capital spending sets the tone for semiconductor industry
fundamentals (it's not 180-degrees wrong because the relationship is extremely
symbiotic). And yes, Skeeter's right, the data does indicate that equipment purchases
are trending up. But it's important to keep in mind that this upward trend is off a bottom
last summer/fall that was a pretty good imitation of nuclear winter. Even with the recent
increase, CapEx appears to be well below what should be considered norms.<<
tad, just a couple comments. first, i understand there is a lag between capexes and real supply hitting the market. however, the issue i raise is that capexes are ramping while we are still in a glut. mu increased their capacity around 60-70% or so and bit output dropped 10%. this balance is merely due to a manipulation of demand that, imho, is not a long term solution. just talk to an opec representative ;-) i believe korea did the same, just to smaller extent. add back that output and what do you have? a glut.
however, these parts will become outmoded and they must sell. the koreans alone drove dram from about $7 or $8 in early to mid 1997 to over $10.50 in a few months by holding back inventory. the end result? a quick race from $10.50 to $1.50 when the unleashed a flood of inventory. of course, the bulls extrapolated $10.50 on up, NEVER understanding the ROOT CAUSE. i'm not sure they still do or they would understand the current situation better.
i have said before and i will say it again, i don't think dram turns until everyone says that dram is a terrible place to be and there will not be a turn for a long, long time. this will be reflected in a very low mu stock price. $80? expectations kind of high? everyone can't be wrong... again! ;-) when they believe that things will or have turned then they will act in a way to participate (add supply). right now everyone believes dram will turn in 6 months (or has turned already) and they all act like it. they add capacity. if mu did nothing they should have 60% more capacity than they showed last q.
i also agree that the equip makers orders are off of low points. however, check out the rate of growth. it won't be long, at this rate, before we are at new highs. btw, i don't think this growth rate continues.
however, everyone else does b/c they think we've "turned." so they act like it and order equipment, dump inventory and aggressively increase output. thereby guaranteeing we haven't turned.
nice point on dram per box. the big growth is over. time to slow. 15% unit growth? you are very nice ;-)
jmho. good luck. |
