Re: Tech-Stock Bad News = Good News for Other Sectors?
Will lots of Tech-stock money be looking for better prospects?
(But also: Slower than expected Asian recovery = Slower than expected increase in oil consumption, etc)
BOSTON, Mass.--(BUSINESS WIRE)--April 23, 1998--Companies that supply equipment to semiconductor manufacturers are expected to average flat revenues at best through the end of next year, signaling a longer-than-projected industry downturn, according to a new study by investment banker Adams, Harkness & Hill, Inc.
A detailed analysis of the industry contained in the Semiconductor Capital Equipment Industry Review concludes that the Asian financial crisis and a glut in the world supply of DRAM memory chips both will continue to discourage microchip makers from making capital investments. The report says most semiconductor equipment company stocks are valued too high to make good buys right now. It also makes detailed projections about semiconductor consumption, equipment demand, technology buys and a company-by-company valuation of the entire semiconductor equipment industry.
"The industry is in a retrenchment period," according to the report's lead author, Adams, Harkness & Hill semiconductor equipment analyst Frederick L. Wolf. "Our outlook over the next 18 months is bearish." Semiconductor equipment stocks are seen by some analysts as a bellwether for the entire technology sector because equipment sales can signal a coming semiconductor recovery.
The Adams, Harkness & Hill report said the Asian crisis has discouraged companies from making capital investments. Many semiconductor manufacturers are located in Asia, which accounted for more than half of semiconductor capital spending in 1997. Japanese companies, which accounted for fully 25 percent of semiconductor capital spending last year, are unlikely to invest much in equipment before the year 2000 because of the economic uncertainty.
"With DRAM prices still going down and the financial problems in the Far East, particularly Korea, I'm becoming less and less optimistic that the chip companies in the Far East will build new fabs," Wolf said.
The most recent upturn in the industry was early last year, as companies spent money to upgrade their existing factories with equipment that produces chips with super-thin circuit widths of 0.25 microns. But the Adams, Harkness & Hill report said companies are unlikely to spend as much on equipment over the next 18 months because of a continued DRAM overcapacity and a tenuous outlook for the foundry business in Taiwan, an emerging player in the industry. |
