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Technology Stocks : Semi Equipment Analysis
SOXX 313.69+4.2%4:00 PM EST
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To: Donald Wennerstrom who wrote (17562)8/3/2004 8:58:27 AM
From: Alastair McIntosh  Read Replies (1) of 95663
 
They are very undervalued right now, but that is because the "market" expects the semi chip sales and semi-equip bookings to "roll over" in the next few months

However, semi equipment sales can roll over without a roll over in chip sales.

When the rate of growth of chip sales falls below the rate of growth of new capacity coming on line, capacity utilization starts to fall.

Since equipment purchases generally can be divided between technology buys and capacity buys it follows that capacity buys will fall off even as chip sales are still rising.

That is the reason why semi-equips may not be under-valued even with rising chip sales. It is highly probable that the scenario of chip sales rising slower than manufacturing capacity will show up in the next few quarters.
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