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

To: Cary Salsberg who wrote (9986)	5/23/2004 2:27:58 AM
From: Math Junkie	Read Replies (1) \| Respond to of 25522

Why do you attach importance to unit demand rising monotonically? I would think that dips in the first derivative would be of more importance for equipment makers.

To: Cary Salsberg who wrote (9986)	5/23/2004 4:05:31 PM
From: Sam Citron	Read Replies (1) \| Respond to of 25522

Cary, I wonder if we could shift our focus for a moment to the supply side of the equation. One of the most prominent bears on AMAT and indeed the entire tech industry, Fred Hickey, believes that the excesses that were built up during the bubble have still not been worked off. Lately he has been arguing that Asia has been contributing mightily to the glut. He also thinks that tech stocks are still too fashionable and valuations are still high by historical standards (when compared to pre-97 pre-bubble conditions). Here is how Barrons' Alan Abelson paraphrased Hickey's argument in last week's Barrons: "Meanwhile, across the wide Pacific, China's wild bout of capital investment has mightily aggravated the king-sized hangover of excess supply in the tech world left behind by our late, lamented bubble. And Beijing's go-for-broke spending, Fred reports, has forced the Japanese, for one, to sit up and take notice, as witness the sharp rise in capital outlays in the past couple of years by the likes of Toshiba and Sony. The question is not whether China will come down to earth, but when and with what kind of thump. While we're waiting, though, the Chinese blithely continue to add, advertently and inadvertently, to the already formidable glut in capacity -- what tech needs least." One issue that I don't understand is the issue of obsolescence in the semi-equip industry. What is the average lifetime of the average brand new piece of semi-equipment? Are older production lines usually scrapped when new ones go online? Or are they merely idled temporarily, to be put back in service if demand warrants? In a nutshell, if we allow that there was a boom from 1998-2000 that caused a glut of semi production capacity, how quickly does that glut become obsolete? Sam