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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Proud_Infidel who wrote (50772)	8/18/2001 10:58:37 AM
From: Zeev Hed	Read Replies (1) \| Respond to of 70976

Brian, first, this is a target, and it will be modified as more information becomes available. But here are some elements of this "forecast": 1. The next upcycle maybe much shorter than the traditional cycle and less robust. This is derived from a macroeconomic model and a "chip specific" model (which may be both wrong). The macroeconomic model suggests that by late next year or early 2003, we may enter a real recession (we are not in a recession right now, and I do not think that we will have two consecutive quarters of negative GDP growth for the next twelve months), a consumer led recession. Such a recession will be discounted by the market ahead of time, putting a ceiling on PE expansion in the stock market in general and the semi sector as well. Late last year, the chip segment capacity was still growing at a clip of more than 25%/year, thus I figure that coming into this year, the capacity was about $225 to $250 B annually. Average selling prices may have caused reduction in this (particularly in the DRAM sector), but technology improvements probably compensated for this as well. Another way to look at it is to assume that this year' chip shipments may get close to $170 B (that is a little higher than "official estimates"), but capacity utilization industry wide is at about 70% (in some areas, like Taiwan, only 50%), thus at full capacity, the industry could ship about $243 B. I do not see that rate of shipments being reached in 2002, and if a recession sets in, probably not by 2004. Therefore, only minimal capacity expansion may be required. That means that most of the equipment shipments in the rest of this year and most of next year will be for technology improvements rather than massive capacity increases, thus a sub par recovery for the sector. Mind you such a sub par recovery could still get us above $20-25 B in equipment shipments, but that would be about 30% below the max shipment rate of the last cycle. Zeev