re: "Thus, what is important is not how much money they (semi companies) are making, since it has only a secondary effect of equipment purchases, but capacity."
Where do semi companies get the money to purchase semi-equipment? There are 3, and only 3, possibilities:
1. Use cash reserves generated by past profits. This will work temporarily, at best. If you do it for more than a few quarters, you consume yourself. Also, a lot of semi companies have no cash reserves. This process reminds me of a children's poem by Shel Silverstein, about a man who was so hungry he ate everything in sight, and then began nibbling at his own toes, and then worked his way up till nothing but a mouth remained, and then nothing.
2. Borrow the money. Again, this is only a temporary solution. And, after what's happened in Korea, how many banks are going to lend to semi companies who aren't making profits?
3. finance expansion/capital equipment purchases out of current cash flow/profits. This is the only viable long-term solution. |
