SEC/N Thoughts

It's a double-dipper for some and a smorgasbord for others. But then again, what's new? The ensuing recovery has again dealt an unequal hand to the sellers of semiconductor and electronics manufacturing equipment. While some companies are reporting significantly better-than-average sales, others are in serious condition and some have already fallen.

One of the reasons for this divergence can be attributed to the perceived inequities in the rapidly growing semiconductor equipment markets of China. Both the sellers of new and used equipment continue to receive confusing signals from the Chinese and U.S. governments. For example, can less than 0.25 µm equipment be shipped into China, and why is it that some used equipment is acceptable and some is not? Interestingly enough, it appears that some companies have broken the code, while others are still knocking on the door.

Misreading the economic tea leaves has always been difficult for equipment suppliers, but it has been an even greater challenge in recent months. The moderate increase in equipment demand earlier this year was misinterpreted by some manufacturers and resellers as the beginning of the industry's sustained and anxiously awaited recovery. In the used business, several dealers have already succumbed to the temptation to pick up discounted equipment in anticipation of turning around and reselling it, only to see the market soften and their warehouses swell. Whether the economists eventually recognize this recession as a double-dipper or not, it has become a reality for some.

Historically, several months of sustained increase in the demand for used equipment has signaled the beginning of a recovery in the semiconductor industry. But, just as each used equipment sale is unique, so are recessions. Both buyers and sellers would do well to remember that "Mr. Doom" stills lurks in those uncertain shadows of economic uncertainty.