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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Zeev Hed who wrote (5912)	10/7/2002 6:09:29 PM
From: Sam	Read Replies (2) \| Respond to of 95531

Zeev, <<The way I see the next major secular bull market right now, is through the accelerated increase in the middle class in the developing world, not necessarily because of a new killer application or a completely new technology.>> I would like to believe this, but.... The "developing world" doesn't have a unified labor force. A few countries have them (for example, Korea can at times mount a mean general strike, as can a few South American countries), but governments largely back management, and defuses many gains by labor. Any time a third world country gets advances in wages and conditions, jobs move on to cheaper pastures. In Mexico right now, for example, both labor and management are paralyzed with fear about China taking their jobs--they just can't compete with Chinese wages and labor. Nor for that matter can almost anyone else. Chinese labor can trump Mexican labor even for products destined to go the US on many goods. So at least I've been told. Under these conditions, I just don't see how a middle will develop in the third world. It's the other side of our great "bargains"--our $7-10 shirts, electronic goods, shoes, etc. carry an invisible price tag. Sam

To: Zeev Hed who wrote (5912)	10/7/2002 7:01:10 PM
From: Cary Salsberg	Read Replies (1) \| Respond to of 95531

RE: "every major secular bull move...is followed by a nasty secular bear." The evidence is anecdotal (not enough "seculars"), but the process is intuitive. The forces that were powerful enough to stop momentum in one direction are not easily dissipated and contribute to strong momentum in the opposite direction. RE: "As for the products manufactured with such new technologically advanced capacity. it will be so much cheaper, that twice as many units will need to be shipped yearly just to "stay in place", and that is probably not too far from the normal replacement cycle of the technology currently in place." I am glad you wrote this because it represents our basic difference. You have included the argument that Moore's Law is the Achilles heel of the semi industry. Output will be cheaper and quantity will not be sufficient to drive a significant increase in revenues. You even refer to "replacement". I think you underestimate the technology roadmap and the ability of technology to change the world and create wealth. The "increase in the middle class in the developing world" to which you refer is a manifestation of an increase in the worlds wealth. I believe that technology is the driver for that increase in wealth. And yes, once the momentum begins, results with positive feedback, such as an increased middle class with its new larger demand for products, accelerate that momentum. You are familiar with the concept that resources increase linearly, but population increases geometrically. I introduce this because so much of economic forecasting relies on history and I truly believe "things are different this time". Historically, resources increased "linearly", even when all known technology was applied to the problem. Moore's Law represents geometric increases. "Resources" which are driven by Moore's law don't increase linearly, they increase geometrically. That doesn't have an historical precedent. There is a requirement for innovation before the potential provided by Moore's Law becomes actual world changing, economy driving products. We have seen such innovation, it has shaped our lives, and we expect more. We don't know the rate of such innovation. We don't know when it will be sufficient to overcome the inertia created by the bursting "bubble". I just think it will not take as long as the historically rooted "secular bear" pretends.