Semicon West kicked off in an odd fashion earlier this month, and I'm still scratching my head about it. About 200 people crowded into the annual breakfast that Applied Materials organizes for stock analysts and media. Applied CEO Mike Splinter and the company's veteran chief financial officer, Joe Bronson, were bombarded with questions about possible weakness in the chip market.
Applied's stock has been weak since mid-February, when the first worries about overcapacity in 2005 emerged. "Wall Street doesn't believe our growth strategy, even though this company has proven time and again, over 35 years, that we can grow. I guess we will have to prove it again by outgrowing the rest of the [equipment] industry," Bronson said.
Splinter said his customers are booking multibillions of dollars in business. He said Applied hasn't seen any cancellations.
A few days later, a half-dozen market watchers from Gartner Dataquest gave their views of the market. Klaus-Dieter Rinnen, who directs Dataquest's semiconductor manufacturing analysts, said the overall prospects for the world economy are getting better, with oil prices the only major concern. The world economy should grow 3.5 percent in 2005 and 3.2 percent the following year.
For the chip industry, fab utilization tightened to 94.3 percent in the second quarter, with leading-edge fabs booked up. Inventories "are still lean, with the first small uptick at semiconductor distributors-but largely in line with our view of stable lead times, pricing and inventories through the fourth quarter," Rinnen said.
On the systems side, personal computers will crack the "magical" 200 million-unit level next year, with notebooks growing at twice the pace of desktops.
Rinnen said Dataquest does anticipate a 2006 down cycle and factors that into its forecasts. But, he said, investments during the current up cycle are "more guarded, more mature" than in previous upturns. "Supply will catch up with demand in the second half of 2005, when higher utilization rates will begin to decline. So watch out for the second half of '05, as the cycles will keep going," Rinnen concluded.
Perhaps the stock market is right, and investors should guard against another severe downturn. But I like Bronson's outlook: Go out and prove them wrong by creating new products that will keep the wheels moving forward though the rest of this decade.
After overhyping technology and losing credibility, it now appears Wall Street has grown overly wary.
David Lammers covers SoC process equipment. Contact him at firstname.lastname@example.org.