Charging into SEMICON West!
Carl Johnson, INFRASTRUCTURE -- Semiconductor International, 7/1/2000
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In the never-ending search for truth we charge to the West Coast to assess the future of device manufacturing. Today's newswires are full of good tidings even though Wall Street has been sitting on pins and needles for two months. Investors are feeling a bit better after the second-quarter correction in prices. It's the semiconductor industry and the pervasive growth of technology vs. the nervous nellies of Wall Street.
I am writing this article in the early weeks of June. Per the script laid out in my last article, stocks in the semiconductor and semiconductor equipment sector appear to have reached a bottom. Barring any near-term dislocations, chip sector stocks look like they will rally into the hot summer months of July. From there, things probably will get a bit dicey.
Why do I say this? The semiconductor industry is linked inextricably to the health of the economy. Yes, there are signs the economy already is slowing, but demand seems to be holding up quite well. Economic slowdowns have always had an impact on final demand. It will take time to feel the full impact of the most recent rise in interest rates, and that's why we have become a bit more cautious.
Suffice to say, this little slowdown has not had a great impact on semiconductor consumption. There are many reasons to remain bullish. Across the board we see tightness in manufacturing capacity. That is extending itself to the materials markets. One materials vendor described the state of tight supply as "unobtainium" - which develops when manufacturers start ordering two or three times their usual consumption and want it delivered in the same lead time they enjoyed during the downturn. The materials business is not the only one battling this element.
What am I going to look for during my trip to SEMICON? In addition to keeping a watchful eye out for any signs of a slowdown, I will look carefully at the tools vendors with products for 300 mm. There are still unresolved issues with 300 mm. Fab automation is a crucial part of this transition. Who has a toolset available to handle these wafers? Clearly, Asyst Technologies, PRI Automation and Brooks Automation will be a big part of this story. Have the issues with 300 mm CMP been resolved? What about the supply and cost of 300 mm wafers?
Looking past the euphoria of SEMICON West we expect an industry slowdown. This slowdown should not be severe, more of a digestion period. The industry has shipped and installed a lot of equipment over the past 18 months. Do you usually rest after a large meal? Despite the slowdown we're still bullish on the long term.
In the very near term, we hear that business is still very good. Bookings and shipments continue to push beyond our expectations. We remain 70% invested in our Model Portfolios because we believe this cycle is on solid footing. Conservatively allocated investments in large and small capital equipment companies will prove quite rewarding. A pronounced slowdown in economic growth certainly would change this view.
Stay the course, be patient, and be sure to enjoy it while it lasts. Hopefully we'll see you at the show!
Carl Johnson is president and co-founder of INFRASTRUCTURE (www.infras.com). He can be reached by phone at 1-972-492-7208.
