Cary, I just don't buy "INTC irrelevance", especially from the boys at DLJ who also told us HWP was "in the bottom of the 9th inning" in January 94 (it's only up about 200% since then!) If you agree that INTC's revenue is the best indicator of worldwide PC shipments, and if you agree that PC's make up 40-50% of the worldwide semiconductor business, then INTC is very relevant to the semi-equipment business, since higher PC growth will end the so-called semi glut sooner than many seem to be expecting. INTC's monopoly certainly gives them higher margins and earnings than the average semi company but I think the issue is capacity and demand...not profitability and capital budgets. I think the Koreans proved this to the Japanese in the last DRAM cycle and the smart chip makers will not let this happen again in this cycle. Maybe I'm not making myself clear but I think better than expected PC growth has to be very relevant to semi equipment manufacturers...if I'm missing your and DLJ's point, please explain it to me.
BTW, I think Japanese competition and an all out price war will be terrific news for the semi equipment makers. Lower prices imply higher demand implies greater manufacturing capacity and better technology to make it profitably...correct? I have had several first hand experiences where dramatic (>30%) price decreases expanded the market so much that, with increased manufacturing efficiencies, profits went UP not down. Examples I know of: HWP's Laserjet, Colorado Memory's tape back-up and APC's UPS's. Every time I see some analyst reduce their forecasts because of price competition, it just shows me how little they understand about demand elasticity, economies of scale, etc. Price competition in this business is good because it expands the market and I happen to think this is very good for the semi manufacturers (both for capacity and new technology reasons). In fact the whole industry has actually been built on price competition (Moore's Law) from the beginning.
Please explain to me once more why increased PC demand is not good for semi equipment manufacturers. |
