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Trying times . . . Gut wrenching, heartbreaking, uncertain times.

It's difficult to find words to describe the emotions we have felt during the past few weeks. We are being tested. Our faith, not just in the financial world, is being sorely challenged.

While the circumstances are certainly different than anything we have seen in history, we're doing the same things we have done in the past. We're pulling ourselves up by the bootstraps. At INFRASTRUCTURE we feel strongly that the weakness in the financial markets has created too much fear and too much paralysis. Just about any positive bit of news has the potential to send share prices into orbit. Whether that news comes in the form of a bottom for capital equipment bookings and shipments, or a resolution of the problems we face on the terrorist front, remains to be seen. The latter point is impossible to predict. On the bookings and shipment front, we know that business is now running at bare minimums. The data we see suggests the industry is living on technology purchases and the sale of spares, maintenance and engineering services. The capital equipment industry typically does not spend a lot of time in this zone. The advances required to produce the next generation of leading-edge devices must be put in place for the chipmakers to continue moving forward. You know what those advances are — 300 mm, copper interconnects, low- and high-k dielectrics. They will happen. Eventually.

We are in a constant search for positive signs. We know what to look for — that's not the issue. Increased utilization rates at the foundries and the final manufacturing companies would certainly allay some of our fears. We're looking for signs that say semiconductor manufacturers are starting to increase their material consumption. We would like to hear from the contract manufacturing houses that inventories have fallen and that orders are starting to stabilize. So far, not much is happening on these fronts.

We plot an "assembly buy ratio" in our publications because we believe it has a direct correlation to the health of the end markets. The health of the end markets is what drives the overall health of the chip manufacturer and his consumption of capital equipment. Right now the assembly buy ratio has moved to the low end of historical ranges. It has not moved up, but we are now in the zone where bottoms are typically formed. We're watching this indicator carefully. An uptick would mean an increase in unit volumes consumed, and it may indicate that we are on the brink of another cycle.

Along with the industry indicators I think it is important to watch the action in the stocks. The stocks were very smart calling the current downturn, and I suspect they will move up in front of the next upturn. If you look back at history you find that the share prices for most capital equipment companies peaked in the first quarter of 2000. Will history repeat itself? Time will tell.

Don't throw caution to the wind. The indicators are not predicting an immediate recovery but, if you are bullish on the long-run outlook for semiconductor technology, select investments should prove to be very rewarding over the next few years.