Alan, yes it's true. I did a big research project a few months back and predicted a 20-40% drop for '98 in overall Japanese spending (and got thoroughly beaten up for my trouble in posting it). I'm not crowing, the information was right there -- even the Japanese had to be comparatively honest that they couldn't afford to keep up their spending levels.
<<The traditional wisdom on the thread is these companies must invest heavily in chip making equipment or get left behind>> I don't want to gainsay this thought, since there's a lot of truth to it. But it's not wise, very obviously, to ignore the cash flow and credit factors. Money is very real, and a company can't necessarily get capital just because 1) it needs it to survive and 2) will be able to make a profit if it gets it. People die because they can't afford to pay for medical procedures.
Anyone who has been in business knows how painful and real this problem is. Assuming (and I think there's some truth to it) that the Japanese and Koreans would be better, and ultimately more profitable, by borrowing another $300 or $400 million in equipment this year, they just can't do it. They don't have the money, most of them are operating in the red, and nobody will lend it to them.
As a bit of news, the KLAC cc admitted that revenues are soft in Europe right now. This is scary. Their US sales appeared to be okay, but the Europeans have been reportedly hanging solid and using the Asian crisis to take future market share, due to their ability to raise funds for new equipment.
If Europe is softening, and Intel softening, and TXN hurting, my current feeling is that the sector has some downside left. |
