JWCB, I'm not sure what specifically set you off, other than that I'm both naive and a jerk and that I disagreed with you, but Hey, I can understand that if you put your money where your mouth is on semi equip stocks, you've probably been under a little stress these last few days. So let off some steam. I'm there for you.
Granted, the Asian crisis has certainly generated deflationary forces. I do not dispute that. What I originally said was that the semi business is better suited to adapt to a deflationary environment because, well, the semi biz has always operated in a deflationary environment. The semi biz has been characterized by rapid and persistent price declines, mainly due to micro economic conditions specific to that business - i.e. economies of scale and technological advances. (This is nothing new, its called "Moores Law" after the person who first popularized the notion.)
For about 35 years prices of basic computing units (MIPS, RAM cells, a NAND gates, whatever) have been declining 20% per year ON AVERAGE. Even if we have general price deflation in this country IF YOU ACCEPT THAT MOORE'S LAW HOLDS*, semi production costs will decline to the point that any excess supply clears the market profitably.
The reason that this business has grown so large is that the product has fallen in price so much that demand has exploded. Primary semi demand has grown through 2 oil crises, abandoning the gold standard, the American S&L crisis, the Vietnam War, disco, the Browns leaving Cleveland etc.. We will also survive the Asian crisis.
regards
spiny
*re moore's law, For the foreseeable future, I do.
PS: ian and stich, I read the responses and thanks for noting that thus far I've been reasonably civilized. |
