SEC/N Thoughts
Gary Alexander, President, SEC/N -- Semiconductor International, 4/1/2001
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To better understand how this is possible, one needs to understand the characteristics of the used-equipment market in a typical cycle (Table).
| Used-Equipment Market Characteristics |
| Peak |
| Demand: High Supply: Low Prices: High Activity level: High (trying to find equipment for customers) |
| Downturn |
| Demand: Falling off, capital getting tighter Supply: Increasing as companies start selling excess equipment Prices: Coming down as more equipment becomes available Activity level: High (transitioning from a seller's to a buyer's market) |
| Bottom |
| Demand: Low Supply: Almost everything Prices: Good deals available Activity level: High (trying to find buyers) |
| Upturn |
| Demand: Starts to increase (leads the recovery) Supply: Shrinks as companies look to used equipment with their limited capital Prices: Start going up as equipment supply shrinks Activity level: High (transitioning from a buyer's to a seller's market) |
Key facts are that the used-equipment market does not normally fall as rapidly as new equipment in downturns; continues to exist at the bottom; and usually leads new-equipment sales in a recovery.
There are two significant insights that should be gleaned from all of this:
- By having an effective used-equipment program in place and being networked, OEMs can help offset the negative impact of industry cycles.
- Chipmakers need to reserve at least some capital during downturns to purchase critical used equipment, when it is the cheapest and most readily available.
