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Technology Stocks : Semi Equipment Analysis

SOXX 296.20

-0.6%

Dec 16 4:00 PM EST

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To: FJB who wrote (48029)	6/1/2010 8:17:30 PM
From: marc ultra	4 Recommendations Read Replies (5) of 95587

I think what a lot of people are missing is not only are we set up ideally for a cyclical semi growth phase that should last a good while, but there's also a clear secular growth element. We have this huge and essentially new technology in smart phones and their infrastructure just getting under way that require a very high number of chips per unit that need to be manufactured to fit in very small packages. The same is true for autos now where new engines are requiring a huge increase in chips per unit. Now we have the iPad (which I haven't stopped using since getting one the other day)which is a whole new category and at least for myself is not cannibalizing anything and for which there is now a rush on to produce similar competing devices all requiring large numbers of chips. Industrial processes and smart grids are all getting more chip intensive. When I used to invest in semi equipment in past years it was mainly about PC demand and memory. The rule when investing in the equipment stocks was get in early and get out earlier. Once there was even a whiff of possible slowdown the game was over. All of these new chip intensive products are just starting this secular growth and it has little to do with the PC cycle. Because I own an illiquid microcap equipment stock (ATRM) whose test handlers are tied into the analog space, I've listened to every call from all the significant analog chip companies and I keep hearing the same thing. The analysts keep pressing about double billing and potential excess inventory build and the answer is coming back the same from everyone that it appears to be real demand, inventories are lean throughout and lead times are either stretched or else they're just able to keep up with demand. It's also clear there's huge demand in the memory area as well. Along with all the analog chips all these consumer devices are using tons of flash memory etc. and in fact PCs happen to be a solid part of the cyclical upturn as well with netbooks and Windows 7 pushing it along. This was again confirmed the other day with NVLS's mid quarter update CC. So I keep hearing this skepticism about the strength and staying power of the cycle and I think that skepticism is misguided. I think people are still overly caught up in that thinking from past cycles and are ignoring or downplaying what is evident all around them. Now If I thought we were in a new bear market I wouldn't be heavily in semi's now. In fact I think we're in a healthy correction in a bull market and the area of the correction bottom was put in at around the S&P 1050 area. From the numbers I'm looking at Europe is not going to cause a double dip in the US. Whatever marginal weakness we get in the US will be offset by the Fed staying acommodative that much longer. I'm mainly in semis and semi equipment and some biotech and avoiding commodity related stocks and financials at the moment.

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