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Technology Stocks : Applied Materials No-Politics Thread (AMAT)
AMAT 256.41+1.1%Dec 19 9:30 AM EST
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To: Sam Citron who wrote (9882)5/20/2004 12:23:53 PM
From: Cary Salsberg  Read Replies (3) of 25522
 
Sam,

Historically, except after the bubble burst, semi unit volume has been increasing monotonically. Semi revenue and semi-equip orders have not followed unit volume. The industry has been plagued by over and under capacity which wreaked havoc with ASPs and profitability and created severe cyclical behavior. The prevailing wisdom was that is is the "nature of the beast". The post bubble environment has indicated that things may be able to improve and that the industry can exert rational control over capacity. There are fewer players to build fabs and there are more semi applications and types of chips. Equipment is more expensive and fab processes are more difficult to implement. Semi makers and equipment makers have been through the longest period of pain in industry history. The key change that these factors have created is an industry wide adoption of incremental tool purchases and, hence, incremental capacity additions. Maybe, all the empty and partially filled fabs left over from the bubble coupled with very gradual improvement over the past year or two have made a new paradigm a "no-brainer", but once the incremental model takes hold it seems reasonable to believe that rational discipline should prevent a return to historical excesses.
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