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Technology Stocks : Semi Equipment Analysis
SOXX 296.74+1.8%Nov 28 4:00 PM EST
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FJB
To: Sun Tzu who wrote (85448)8/9/2020 10:10:26 AM
From: robert b furman1 Recommendation  Read Replies (2) of 95487
 
Hi Sun,

Sam makes a great point that the semi's had over a decade of price destruction as sovereign governments supported their entry with below cost price competition.

Finally after decades, the rational allocation of resources stopped the government subsidies and the truly strongest competitors rose to a level of profitability - only after fighting starts and fits of excess capacity additions.

The evil in this is sovereign money.

I think that parallels very closely other industries.

First of which that comes to mind is crude oil and natural gas.

When the Russians and Saudi's decided to flood the world with oil, exactly when the demand plummeted from Covid mitigation, was a similar insane pricing action - designed to destroy competitors.

The EU and the US also have had decades of arguments regarding the subsidies of building planes Boeing vs Airbus. Rail to a lesser degree.

These are big swings in profitability that extend industry wide.

With regards to INTC, one of their key beliefs is to operate debt free. This is the benefit of maintaining their paranoid about competition. As long as you have little to no debt, and build the better widget, the sovereign country funding will grow old and unacceptable.

It just takes time.

Bob
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