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Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: David C. Burns who wrote (51940)	9/29/2000 12:27:50 PM
From: Rob S.	Read Replies (1) \| Respond to of 53903

The semi industry is still highly cyclical despite a huge broadening of end product markets. There are a couple of basic things to understand about these cycles: 1] Semi prices are very elastic. 2] An incremental increase/decrease in the supply/demand situation can have a drastic impact on prices. As a result, during the previous major downturn many semi companies were reporting sales and earnings that were off say 30% while they reported unit shipments up 15%-25%. The end product demand had not changed all that much; maybe 5% to 10% off on growth rates of 20%-30% (electronic industry growth rates decreased to something like 15%-20%) or what you might consider "marginal". But while demand changed marginally, prices collapsed drastically. That of course is the glory and the fear that swings the semi sector to extremes. Early this year I did a survey of research reports and articles on semi and semi equipment cycles. All but one specialized research firm projected continued growth through about 2002. The one firm that offered an alternate opinion suggested that Intel and AMD would get into a price war by mid summer. Their projection for memory demand/supply held up at least into the first part of 2001. The forecast for a uP war didn't happen. If anything, microprocessors have gotten more expensive as the market has moved to the next generation and higher speed grades. Also, PC manufacturers have not stressed the "sub $1,000" price category as they once did - maybe they just figured out that it was dumb to sell PCs that cheap (no profit). My outlook for the semi sectors is mixed: I think we will see a return to enthusiasm but the market will be very selective and the run ups will be much less than the huge moves we saw over the past couple years. Semi stocks tend to stay in a bull trend as long as the 3-month rolling forecast for the book to bill stays above 110. We have at least one healthier move up in the SOX left. Its time to buy selectively and very carefully and sell when a stock hits resistance levels or reverses. This is not a market for making easy money.