| | I read Zeev's response, already. I have an explanation and it applies to KLIC, EGLS, TER, CMOS, etc., the "back end". I have said for 1 1/2 years, now, that we are not in a "normal" cycle. A "normal" cycle is characterized by secular, increasing unit demand. The cycle is determined by the supply side. Under and over capacity (supply) affect average unit sales price and hence revenues and profits. In "normal" cycles, the predominate driver is capacity orders. Moore's law and technology are a given, described by the roadmap, but they are implemented according to a capacity driven schedule. We are in a "bubble aftermath" and unit demand fell significantly from the "bubble" peak and has not been growing much. There is overcapacity in the industry. The most important unit demand growth is in new technology. Obviously, there is no "new" capacity left over from the "bubble". In this "cycle", the predominate driver is technology orders. This favors the most leading edge companies and the front end over the back end.
In "normal" cycles, the top quality, leading edge front end and some of the top quality leading edge back end companies have "cleaner, more efficient" operating models than KLIC. They have more cash and less inventory and fixed assets throughout the cycle. This lessens the need for debt and there is little unless the market makes it very cheap or acquisitions are contemplated.
So, KLIC should have a discount to the industry in this difficult time of predominately technology orders because they are hurt more and have less financial strength and a less ideal business model to deal with the hurt.
I don't mean to imply that KLIC is not a survivor. It will outperform again when capacity orders drive the cycle. |
|
