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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Czechsinthemail who wrote (5848)	6/15/1998 8:44:00 AM
From: Mason Barge	Read Replies (2) \| Respond to of 10921

<<I suppose my question is whether there is likely to be enough market demand in Europe and North America to warrant increases in Asian capital investment in semi-equipment. >> If you will forgive me for answering this, the answer is largely yes, but it's not the most important question. The biggest problem is that, in Korea for example, they don't have any money (Samsung down 8% last night) and nobody will lend them any. Even if the Japanese banks wanted to lend them money, the huge scrutiny on their banking system and Japan's own problems aren't going to allow for it. Most of these companies now have a negative book value. With the Pacific bubble bursting, the only value they have -- future earnings -- is gone. It doesn't matter how smart it is for them to invest in semi equipment. They can't do it. Their countrymen are screaming for jobs (and in a few cases, food), they are defaulting on their debt, they are heavily leveraged and hemorrhaging money. This is the problem with those heady 200% debt-to-equity ratios -- when it's good, you make a ton, but when it's bad, there's no equity to fall back on. I'm really guessing that the Koreans (again, for example) are either going to face elimination from the semiconductor market or sale of equity to Western firms. Either way, the recovery in the semi-equipment sector is going to be driven by dollars, not yen. And it will be awesome when it comes.

To: Czechsinthemail who wrote (5848)	6/15/1998 11:02:00 AM
From: Katherine Derbyshire	Respond to of 10921

>> I suppose my question is whether there is likely to be enough market demand in Europe and North America to warrant increases in Asian capital investment in semi-equipment. The idea would be that the return on investment and/or the increase in market share would be sufficiently high to justify the additional capital outlays. My sense is that the prevailing opinion seems to be that there won't be -- at least in the short run. But it is hard for me to imagine domestic U.S. earnings growth of 13% in the 3Q and 18% in 4Q (as some are forecasting) without some significant demand for semiconductors.<< As someone else pointed out, the Asians would love to invest, but it's unclear where the money is going to come from. Asian banks have problems of their own, and intelligent Western banks are likely to demand punitive interest rates given the existing debt problems at many of these companies. Moreover, DRAM capacity is still way out of balance with demand, and ASIC/foundry capacity isn't much better. No matter how much you need the technology, it's hard to build new fabs when your existing fabs are bleeding money. Yes, strong DUV sales will occur, but probably not as quickly as expected. As for the earnings growth forecast you quoted, I don't see it happening without significant semiconductor demand, either, and therefore see those estimates as perhaps overly optimistic. Bill McClean, president of IC Insights, discussed all this in a good bit of detail about a month ago: news.semiconductoronline.com Since then, the picture has, if anything, gotten worse. Katherine