Zeev's Turnips Patch-No Politics (ZEEV)

[langostino]

SantaCruz - semi cycle

absolutely right. the analysts who have called the end of this cycle are clueless and paranoid, apparently out of touch with the day to day semi business and gunshy from the past few years.

9 days ago, Taiwan Semi's Board jacked up its CapEx and approved an additional $1.4 billion for new production equipment. They are now running at 105% of capacity. Chartered is running at over 95%.

A couple weeks ago Cypress Semi CEO T.J. Rodgers took Q&A at an analyst conference and passed along the following info:
(1) semi companies like his are looking "through" the order books of their customers this cycle to make sure there is no double-ordering (as helped contribute to the bust of the last cycle)
(2) Cypress cannot meet demand, it is having to ration product, giving customers only 80% of their orders.

The transition from .13µ to .09µ process hasn't really fully kicked in. Why? Because the industry lets the couple of leaders (i.e. TSM, IBM and Intel) work through the practical problems with being on the bleeding edge. IBM has struggled with the transition for well over a year now at their Fresh Kills plant and only now is getting yields up near full production levels. Once the kinks have been worked out by the leaders, then others follow.

Having said that, I'm no fan of the equipment stocks at these levels, and will be actively short them next year once the cycle runs its course. But the market has jumped the gun on the end of this semi cycle, and driven a number of semi stocks down to the point where there is likely to be a serious semi driven rally somewhere between here and year's end.

I will recommend to anyone interested, a trip to the investor section of Cypress Semi's web site where you can download a paper written by T.J. Rodgers on how to value his company's stock. He set up a computer (named it HAL) to run simulations on every day that CY has been traded. It's dated, but still an illuminating piece, and worth the read if only to hear a CEO say that you should not be conned into buying when the analysts say buy and selling when they say sell, because they are a bunch of stinkin' salesmen who are trying to sell to you at the top and buy from you at the bottom. Classic straight-talk from a no-b.s. CEO. (Download from "Investment Analysis - Thinking About Cypress Stock")
http://www.corporate-ir.net/ireye/ir_site.zhtml?ticker=CY&script=2100

All FWIW ....