Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Cary Salsberg who wrote (4546)	12/20/2002 1:15:39 PM
From: Proud_Infidel	Read Replies (1) \| Respond to of 25522

FWIW, if we are making predictions, I will post what I feel to be the most likely scenario. While I do agree that the next upcycle will be noticeably longer than ones from recent memory, I also believe that at some point there will be a rush for equipment as allocation hits the industry once again(ah, for the good ole days!). While we will most likely not ever see another 80% upyear for the sector as we did in 1999, it is highly plausible that at some point a fear of being left out of the party will hit the semiconductor executives at some point, causing many to panic and spend more than they should, thereby "pulling in" the full recovery. This scenario assumes that we have a more robust recovery than we are currently witnessing in the economy. Given the fact that of the current consumer debt overload, this is certainly not a given at this point. Brian

To: Cary Salsberg who wrote (4546)	12/20/2002 7:35:37 PM
From: C_Johnson	Read Replies (1) \| Respond to of 25522

Hi Cary, AMAT's peak sales in 2000 was $9.6B. I am perplexed as to why you are extrapolating future growth from the revenue peak because later in your post you say this: "....the bubble was a huge bump in the road that tripped up the industry and temporarily changed its growth dynamics" According to the information at the AMAT website, found here: appliedmaterials.com AMAT's 5 year annual growth rate for revenues is 4.4%. Looking back that far would start us out in the last quarter of '97 - right when the industry was moving their manufacturing to sub-0.25 micron. In terms of unit growth and overall consumption of finished goods that was a pretty good period for the electronics industry - even if you factor out the bubble! Extrapolating from the revenue level posted during the bubble, when chipmakers were spending $0.32 of every revenue dollar on Fab Equipment, seems to me as quite a stretch. To see the capital equipment spending to semiconductor revenue ratio have a look at slide 38 at this link: infras.com Recently we read predictions that semi-equip long term growth would decline from 15% to 8-10%. While some may be predicting this today (I have been saying it for a number of years), the fact is that the semiconductor industry has been growing at a CAGR that is less than the 8 to 10 percent level, your lowest level, for almost ten years. In 1993 the industry was $84 billion in size. Today the industry will generate revenues of just over $140 billion. Simple math tells us that this long term industry growth rate is well below 10 percent. Now, some will say I am looking at the trough revenue levels being recorded today but consider this, if we look only at what many consider the really normal years of this past ten and take the bubble year out, we find that in 7 of those years semiconductor industry revenues have been ranged between $153 billion and $126 billion. Interestingly, the $153 billion level was recorded in 1995. The primary reason for that jump? ASPs for DRAMs exploded through the roof. The next highest year was 1999 when the industry finished just under $150 billion in revenues. Everyone knows what drove that year crazy - Y2K remediation, the Dot.com bubble, wild and crazy expansions in the telecosm, irrational forecasts, and whatever else you can think of.... For reference, here are the semiconductor revenue numbers: 1993: $86,742 1994: $111,167 1995: $153,570 1996: $138,894 1997: $141,186 1998: $126,151 1999: $149,379 2000: $204,000 2001: $139,000 2002: $145,000 (Optimistic Est.) We can do the same exercise for the chip equipment industry. The size of the industry was $19.4 billion in 1993 and it will be well under $20 billion, this year. Looking deeper, in 5 of the past 7 years, excluding the $59 billion bubble in 2000 and this year's disaster, the industry has recorded "worldwide" revenues ranging between $36.5 billion and $27.7 billion. Peak years, were 1996, 1997 and 2001. All were within $500 million of $36 billion. Well, that's enough for me. In my forecasts I would not use this year, or use the peak year as a basis for predicting a longer term future but I am willing to consider it if there is a good explanation. Do you expect Applied to enter a new market that is going to push them over the top? My guess is that if it is in the chip equipment field it would have to be lithography to really have a meaningful impact. Either that or they would have to take significant market share away from KLA-Tencor. Your comments please. Regards, Carl