re: leading indicators for semi-equip stock prices:
When chips were mainly for PCs, and the chip industry was a far smaller part of the world economy, the semi-equip cycle was not correlated with the general business cycle.
Now, with chips in everything (cars, kitchen appliances, toys, cell-phones, etc), I think the chip (and semi-equip cycles) are going to increasingly follow general consumer demand. So, the earliest leading indicator may be consumer sentiment, and consumer spending.
As long as consumer spending is declining, chip demand will not rebound. In past cycles, where demand for chips was increasing, but capacity was increasing even more, as soon as inventories got cleared, chip ASPs would firm and then head up, and soon chip companies would be ordering new equipment. In the current downturn, when chip inventories get cleared, but demand among end-users continues to decline, no one is going to be ordering any semi-equipment. Well, maybe a few brave chip companies who are sitting on piles of cash will do tech buys, but everyone else will be steadily cutting expenses, including capex. Result: no upturn in semi-equip bookings, and no upturn in semi-equip stock prices.
In addition to the above, as long as the general economy is slowing, the bear market will continue, and valuations will continue to get compressed. The stock market may lead the economy, but there needs to be some signs that the economy will be turning 6-12 months out. So far, I see few signs of that.
So, I think we've got to wait until inventories clear, and then continue waiting until consumer demand picks up. Only after that point will ASPs for chips firm. And only after ASPs firm, will bookings turn up.
Or, just wait till bookings are up for two months, which means probably giving up the first leap off the bottom for the stocks. |
