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

To: Proud_Infidel who wrote (5202)	1/29/2003 1:04:33 PM
From: Cary Salsberg	Read Replies (2) \| Respond to of 25522

RE: "...capital investment during 2001 and 2002 aimed at technology introduction rathetr than volume meant a lack of imminent manufacturing capacity coming onstream and that would help achieve a balance between capacity and chip demand in the third quarter of 2003. Thereafter prices for components would rise rapidly and complement already booming unit shipments. In 2004 all bets are off. We're saying 35% but what we know is that structurally 2004 is a very strong year for reasons of capacity. There will be over-ordering. There will be over building. It's inevitable." I agree with parts, but fundamentally disagree with the overall conclusion. First, technology buys have not been only R & D purchases, but capacity additions for new technology. I don't see a balance between capacity and demand ever achieved for "old" technology. Leading edge capacity utilization is very high and already reflects a balance. I believe that capital expenditure continues to be carefully allocated based on end user demand for advanced products. Growth in future years will reflect economic improvement and an acceleration of leading edge products. While I can't predict how long the industry will continue to allocate capital prudently, I don't buy 2004 as the year the industry returns to a previous pattern of excessive investment. I don't buy the current "booming" unit shipments characterization. Part of the reason I have predicted a longer, slower recovery period is the industry consolidation and the high cost of new capacity. These should postpone the clasical pattern of excessive investment until the economy is very much better than 2003 and 2004 are likely to be.