Tech Investors Acting Irrationally
excerpt Barrons 11/3/97 interactive.wsj.com
Dan Hutcheson, president of VLSI Research, a San Jose
firm that tracks the semiconductor-equipment industry,
reckons that investors have been handed a buying
opportunity. The biggest concern for the equipment
sector, Hutcheson says, has been the potential for a
slowdown in demand from Taiwan, which recently has
snapped up about 15% of global chipmaking gear, up from
11%-12% a year ago. "People think Taiwan has overbuilt,
that they'll crash," he says. Most of what the Taiwanese
chipmakers produce, though, ends up in goods sold in the
U.S. and Europe -- not Taiwan or Hong Kong or Malaysia.
Not only that, but Hutcheson believes the drive by
Taiwanese chip producers to build market share will
overshadow their profitability concerns. "They'll spend
whether they make money or not," Hutcheson contends.
"People tend to overlay an American bottom-line
orientation over Asian economies. It's the same mistake
we made during the Vietnam War."
The real issue for the Taiwanese, Hutcheson says, has
been how they'll fund their insatiable demand for
chipmaking gear. Hutcheson says some U.S. equipment
leasing firms, including Comdisco and General Electric's
GE Capital unit, have stepped in to provide financing for
the purchase of high-priced hardware used in chip-making
plants. The bottom line, Hutcheson says, is that the
sound and fury over the Asian crisis signifies nothing
for most chip-equipment firms. Concludes Hutcheson:
"We've looked at it closely, and we see no significant
effect."
Hutcheson expects global chip-equipment sales to grow 21%
next year, up from just 5% this year. In 1999, Hutcheson
predicts, sales growth could hit 30%, propelled by the
chip industry's move to parts with smaller and smaller
lines, first 0.25 micron from the current 0.35 micron
standard, then 0.18 micron in subsequent years.
Hutcheson, it turns out, is nearly as optimistic about
overall chip demand, forecasting revenue growth of 22.3%
in 1998, up from 9.3% this year. "If I were in the
business of recommending stocks," he says, "I'd be
recommending buying across the board." |
