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

To: Proud_Infidel who wrote (11434)	9/4/2003 12:31:16 PM
From: Cary Salsberg	Read Replies (1) \| Respond to of 95645

RE: "targets are for total IC revenues going forward" Brian, You are correct, "very difficult." The problem is compounded by the huge unit volumes of "commodity" chips and the potential for more chips becoming "commodities". The cost of ever more powerful DRAM in PCs has fallen and will level out at some fairly low cost level. In this scenario, DRAM revenue from PCs does not increase. One may conjecture that profitability and cap ex can rise for PC DRAM makers, but not enough to attract savvy investors. I have tried to limit my semi investments to companies with chips that have little chance to become commodities. I have posted that my initial model for them when the recovery gains steam is 40% sales growth for 2 years (a double) and 25% growth from there (a double in 3+ years). I have no way to pick precise numbers and I look to actual results to refine my projections, but the model of an initial burst followed by long term, steady state is not original. The key for IC revenues going forward is the expansion of target markets and niches for ICs. This will be new revenue, commodity type or not. I expect that new IC revenue will be an important driver of semi cap ex and will increase IC revenues more than is currently expected. I believe that leading semi cap ex providers are, generally, safer bets than semi companies because the tools will not, likely, become commodities and tools require far less cap ex. I think semi equip investors should prepare to move out of the semi equips and into selected semis about 2010, my current estimate for the beginning of the next up cycle after this one. Again, dates are guesses, but this is probably the last up cycle to be fully or highly invested in cap ex. Moore's Law will see some real problems as CMOS fabrication approaches the end of the line. Semi-equips are too volatile to expect to be in a good position to sell when the reality hits the market, so prudent investors must err on the safe side. Cary