Joan:
I know you addressed your comments to MB, but I hope you don't mind if I throw in my two cents worth.
I agree with your comments with respect to Japan's APPARENT goals within the the semi area but there is no consensus yet, and in that land, nothing happens without it. The incentives for Japan to so do have been in place for a while, and they have of course already been moving much of their raw manufacturing to lower wage areas for some time now. The currency differentials also provide impetus, as does the fact that, not unexpectedly (at least by the semi-conductor bears that hang out on this forum), semi production plants around the world are sprouting "for sale" signs and the "asking prices" are falling fast.
That said, there are impediments. Within Japan's shell-shocked Ministry of Finance, the mountain of past lending/investment nightmares loom large, and semi-conductor horror stories are prevelent therein. If the current "consolidate and clean up " point of view prevails (in a consensus society, it takes time to get everybody onside), then not much dough will flow. It's going to be interesting to watch.
One other point if I might. Looking back over the last two years, I noticed that a larger percentage of Japanese analysts (say 20% as opposed to maybe 2% in the U.S.) recognized early on what was happening to the PC/semi area, namely commoditization and the inevitable "supply buries demand" syndrome. Certainly today, there is little of the blind stupidity about the sector in evidence over there as is found here. Many knowledgeable Japanese investors appear to view the sector as I do, which is to say that it was a fun party while it lasted but the house has been wrecked and the cops are enroute. Time to exit through a bathroom window and depart the neighbourhood. I suspect that there will not be much enthusiasm for semi-related financings among the few Japanese underwriting firms that survive the current holocaust.
The basic problems of the industry, too many players, and more importantly, a glutted end product market, appear to be causing some of the key players over there to wonder whether they want to be in the game at all, particularly over the next few years. My own expectation is that we will see more TXN type deals wherein the owners dump semi production plants and pay the buyers dearly to take them.
The Japanese are known more for buying market tops than market bottoms. Time will tell whether they hold true to form.
The last point you make is right on. In the current environment, the currency differentials alone make it impossible for American manufacturers to make a profit.
Best, Earlie |
