The Prophet, this time is no different. The strange think about capitalism it is self adjusting. When great profits opportunities are discovered, capital flow to those opportunities to exploit these. The flow causes excessive build up of capacity which put pressure on ASP and voila, another contracting cycle is in progress. One factor that this article is not taking into account is that the driving sector (Internet) is just on the verge of a major reduction in its growth. Until March this year, you could not approach a VC with any project that was not web related, today, I-net companies requiring additional financing are forced to to accept murderous terms (floorless financing) for such money. Huge amounts of capital has been wasted by the process of of "money flowing to opportunities", there will be shortage of capital to finance the growth these article are discussing. You just take a piece of paper and make the calculations yourself. Current peak shipments of chips is $15 B monthly, or $180 B on an annual rate, assume we will end 2000 with shipments pretty close to $200 B (still a lot of growth ahead). However, the cash flow generated from these sales is at best $30 B annually, but the current rate of Cap-ex in the industry is $55 B, a shortage of $25 B, this year, this gap can still be financed due to excess liquidity in the system, but that gap cannot be maintained for long, IMHO.
Zeev |
