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

To: Ramsey Su who wrote (6964)	9/19/1998 3:37:00 PM
From: Clarksterh	Respond to of 10921

Ramsey - I think that there are only two things that could end the growth of the SEMI industry: 1) We hit a technological wall - if, for instance, we just cannot make 50nm devices without much much more expensive equipment. At any time in the last 20 years this has always appeared to be about 5 to 10 years in the future, and yet it never comes to pass. I suspect it will not come to pass until sometime after we hit the quantum level which is on the order of 10nm(?), so it is still a long way off. 2) We run out of new uses for more powerful devices. I do not think this is likely to happen anytime soon, although there may well be transitions from one driver to another. For instance, the primary driver of the last 10-15 years has been the high powered PC, but I suspect the primary driver for the next 10-15 years will be communications and the ubiquituous PC, and the transition may be tough for the SEMI industry. (See below) But that doesn't not mean that growth has stopped. Transition problems: 1) Assume growth of the semi industry has been 25% per year and that this growth is evenly split between all segments. Of total sales this year assume that 50% are PC, 20% are communications, and 30% consumer. 2) Assume that the PC market is slowing down to 10% per year since no one needs the extra power. To keep the same total growth rate (assuming consumer electronics is unaffected and is still growing 25%), then communications will need to grow 62%. While communications is growing rapidly, it's not that rapid. 3) But, lets assume that communications is growing 40% per year. In three to four years it will take over the lead position that PC's once enjoyed, and the high rates of overall growth will once again return. Note: For the purposes of this comparison I've ignored the effect of the drive towards ubiquituous PC's, of which the low priced PC is only part. (Other parts are the palm pilot, the set-top boxes, ... .) Microsoft is desparate to get a foothold in this market with Windows CE. Given this driver along with the communications area I expect the transition to be 2 or 3 years assuming some new killer app doesn't rescue us first. Clark PS As for my views on long term growth rates - I expect it to be a little above the average growth rate for semiconductor chips and thus around 30%/year. The reasoning is: a) I expect the long term semi chip market to continue to grow at 25% per year, so I expect margins, long term, to remain stable. b) Thus, the semi chip manufacturers will continue to spend money on new equipment which makes their products cheaper to produce, and their budgets for semi equip will slowly increase as a percentage of their total revenues as personnel and land and buildings decrease as a percentage of total revenues (can you say productivity?).