This may be obvious, but I'd like comments, especially disagreements.
Because of a perceived recession, many CEO's want to lock in any ST profits. The easiest, and probably the dumbest, way is to slash capital expenditures. Therefore good companies like AMAT and EMC were vulnerable and indeed were badly hurt by the slash of orders. In addition, there is a consolidation period in technology, especially in personal electronics since most of us don't need the extra features or power.
However, IMO (which has been wrong), several positive forces are slowly and inevitably emerging. The major one is competition. Once the bigger wafers are begun, the need to reduce costs and hence compete, is compelling. As capex is demonstrated to lower unit costs and develop better products, the question shifts from "if" to "when". About 15 yrs ago, I got into AMAT and EMC because of this reasoning.
In addition, newer products are emerging. Digital photography is power and memory hungry, DTV is picking up steam, directional positioning maps are becoming more standard in cars, and the need for cellular phones, especially with huge emerging markets is gaining momentum. Digital controls are now standard. I visited a friend's printing factory in Portugal, and everything was now automated or he couldn't compete. This was Portugal which is behind other western countries.
I also suspect that middle size companies that pay their CEO's 2 million a year do not want to cut profits by spending on capital investments. Most companies have cut capex budgets out of fear but will be forced to compete by both competition and newer market demands. IMO, again, it's not "if" but "when".
fred |
