3. The reason the PEs are low, is because a) we are looking at cycle peak earnings in 2011, or b) we are in a secular bear market and all PEs have been falling since 2000.
Or (c) there is a great deal of uncertainty about what the coming year (or two) will bring, and therefore people are unwilling to give semi companies higher PEs.
Being unmercifully pummeled as the sector was in 2008 tends to make investors gun-shy. Understandably so.
However, IMHO, this year we will see NAND shine and logic do fairly well, while DRAM continues to get hit as the Taiwan vendors struggle to survive, and the companies that serve the different sub-sectors will decouple from each other. Eventually, the Taiwan vendors--or at least some of them--will accept that not all of them can survive, and will take Elpida's offer to merge. That is the only hope for them. DRAM will consolidate, and eventually become a healthier sector, with 3 or 4 players intact. NAND will continue to shine because it is probable that demand will continue to be strong enough due to tablets and smartphones until the vendors' continually falling costs allows their Mother of All Demand Drivers (SSDs as a mass market for businesses and consumers) to be cost effective. And that will be a demand driver for years to come, IMHO. |
