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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (10279)	3/6/2002 2:14:22 PM
From: Ian@SI	Read Replies (1) \| Respond to of 10921

Jacob, Have you considered the migration of chip makers to the fabless model with a relatively small number of foundries committing $3B+ per fab? i.e. It takes longer to work off excess capacity resulting from 300 chipmakers overbuilding than it does from 3 foundries overbuilding... Ian

To: Jacob Snyder who wrote (10279)	3/6/2002 2:33:01 PM
From: Robert Douglas	Read Replies (1) \| Respond to of 10921

Jacob, Good post! As I see it, the reason the semiconductor equipment industry experiences such massive swings is that it sells capital equipment to an industry that sells cyclical goods. This is a recipe for violent swings. What might mitigate this cycle in the future? 1) Less cyclicality of demand for end products. I think this is happening as semiconductors move into more products that are "consumable" in nature rather than "capital" in nature. Also, as the proportion of these products that are replacement of existing products increases, there will be smaller swings. Replacement cycles are milder than growth cycles. 2)Consolidation of producers. This is ongoing. As there are fewer and fewer competitors, the capital budgets plans are smoother and experience smaller swings. 3)Diversification of economic exposure. This recession has been noteworthy because it is the first time in 50 years that almost every one of the world's economies has slowed down at the same time. This is not the norm. Furthermore, the U.S. is becoming a smaller and smaller proportion of the world's GDP which will diversify the purchase of final products by countries. It's easy to say that this industry is condemned to violent cycles because of its history. I think this would be ignoring the factors which have caused these cycles. The natural maturation of the industry will lessen these swings in the future, IMO.

To: Jacob Snyder who wrote (10279)	3/6/2002 6:58:41 PM
From: Cary Salsberg	Read Replies (1) \| Respond to of 10921

I am not predicting a change in the cyclicality, I am saying the current situation is unusual. First, we ARE having a "stretched-out down cycle!" Orders have been relatively flat for months and predicted improvements are small. As you point out in a follow-up post, cycles have been created by supply, not demand. Demand had been following a steady, rising, secular trend. This down "cycle" was caused by demand decimation. The up "cycle" must wait for demand to rise enough to create undercapacity. The most likely potential undercapacity situations will be in leading edge technology. This will not cause mass fab building because the leading edge is always a small percentage of production and it may be addressed by upgrading tools in existing fabs. Eventually, demand will create an undercapacity situation and the industry will return to your "normal" cycles by overbuilding and reaching new highs in semi-equip revenues. I understand what Zeev is saying in his response to my post. I am not sure what will cause semi-equip orders/revenues to double before the consumer recession. I would expect the consumer recession to be the result of an anemic recovery in business spending which allows a continuing deteriation in the employment picture.