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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 142.62+2.2%Nov 21 9:30 AM EST
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To: Katherine Derbyshire who wrote (6972)9/20/1998 1:14:00 AM
From: Ian@SI  Read Replies (2) of 10921
 
Katherine,

I'm not arguing that chip makers are rolling in profits today and certainly not the commodity DRAM makers where the Glut has been largest for over 2 years. Yes, they are suffering and will continue to suffer until:

1. Productivity improves
2. Volume increases (i.e. CapUtil'n goes up)
3. Deflation returns to trend.

My point was simply that lower prices to the consumer will cause volume to increase faster than trend. This will suck up available capacity. ... which should result in some pricing power for the chipmakers. i.e. - they won't lose all future productivity gains to price decreases.

With the recent spate of Fab closure announcements and the delays in building new capacity, the glut may disappear faster than is currently expected. I certainly don't intend to place any more money on this hypothesis before there's some concrete evidence that it might actually be happening.

And finally, if consumers buy increasing numbers of microwaves and other products will even more chip content, than the makers of those products will buy more chips from chip companies eventually causing the chip companies to buy more equipment from equipment companies.

I certainly didn't think that it was necessary to point out that connection to you. :-) (and I still don't think so.)

Another fact that I'll grant you is that many Equipment companies are priced as if the world will enter an out and out depression that it may never recover from. e.g. ASYT, MTSN, SVGI, BRKS priced nearer to Net Cash than book.

Ian.
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