"I'm just using some simple logic here:
Premise 1: AMAT is cyclical;
Premise 2: Things absolutely terrible right now;
What do you think is the next logicical step in the progression?
A. things get better, or
B. AMAT breaks its cyclicity to the down side."
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brightness...
There is a flaw in your logic in that you left out possible options and assume that because "things are terrible" that there are only two possible points in the cycle that AMAT could be - at the bottom of the cycle or "breaking cyclicity" (I am not sure what you mean by that). Obviously that is not the case as AMAT could also be merely in the downleg of its cyclical pattern, which I believe is the case.
By using the given "things are terrible" (which is true) you apparently feel that the only answer is that the bottom of the cycle has been reached, but it is undeniable that things have been terrible for some time now in the sector, a fact that I am sure every CEO would attest to. Things are worse now than last month, and they were worse last month than the month before (that is called a downtrend) so just when did the bottom occur??? This month?? Last month?? The previous month?? And what happens if (as I expect will be the case) things continue to get worse, not better?? At what point does the bottom occur?? Using your definition ("things are terrible"), the bottom has been occurring every month for over a year now, which becomes rather worthless as a working tool for buying or selling in the market. Although I will admit that the various analysts and the CEO's of the companies in the sector have called "THE BOTTOM IS HERE" just about as often, the truth is that they were either fibbing to the street or they were dead wrong, one or the other - take your choice.
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"The previous article's repeated reference to old fab facilities having low utilization rate shows how little the author knows about the industry. Who would want to feed silicon wafers into a 0.25u fab that makes Petium II class processors that sells for peanuts when the same slice of wafer can be fed into a 0.13u fab that makes four times as many processors running five times as fast and sells for 10 times as much money per chip, resulting in a 40-fold return on the wafer? Low utilization rate could be an indication that the average fab is long in the tooth and ready to be phased out. That means money for AMAT and the like." -- brightness
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Here, I think you missed his point and focused on INTC, which is rather unique in the field and about the only chip company on earth that is spending money (so far) on new fabs. The question for most chip companies is first that they have no profits, heavy debt, and no extra funds with which to build new fabs. Secondly, even if they could, why would they when they are already producing more product than they can sell when using only a portion of their facilities. It simply does not make economic sense, and moore's law has nothing to do with it at the moment. When the economy recovers and those companies that remain begin to make money again, they will then begin to invest in new equipment, but until then the equipment space will remain mostly dead with only the occasional technology buy coming in.
The food chain in the chip and equipment space starts with the consumer and works its way back to the equipment company, not the other way around. The equipment companies cannot recover until the chipmakers recover. The chipmakers cannot recover until the consumer begins to buy enough of the end products for the chipmakers to start making a profit once again. The consumer will not be able to make that leap to a new peak in buying finished goods (remember he is just now starting to decline) until he has paid down a good portion of his debt and is less concerned about being unemployed or underemployed. I believe that the consumer will be able to recover only after an extended period of economic healing, which means there will be no quick recovery for the chipmakers, which means there will be no quick recovery for the equipment makers.
It's all pretty simple when you think about it.
mlsoft
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