Excellent points, NAND! The equipment maker market IS a complex mosaic, and the global economy is all of that to the 100th power. The financial markets, as you surely know as an analyst, have many forward-looking indicators, yet even among the most sophisticated market-watchers, there is a broad split between winners and losers every day. Still, it's addictive, isn't it, to see shifts in orders and consider their impact on the larger world around us. A butterfly flaps its wings in Beijing and a tornado roars through the US mainland -- is there a way to compute that relationship? Perhaps the semi eqpt makers predictive theory belongs on that level, or maybe it says something about the health of the larger tech economy.
Except AMAT and LRCX--two of the most important semi-equipment firms in the country--have both just been bullish in their SemiCon analyst meetings. And I would dispute your alleged cause of orders dropping--it might well happen because of where in the cycle semiconductor vendors are. When they add wafer capacity, it is often too much to digest at once, so there is a glut for awhile and orders to the equipment companies dry up. That doesn't necessarily mean that the general economy is slowing down (although of course it might mean that).
Plus right now there are so few customers for the equipment companies. Consolidation has taken its toll, and oligopolies now exist in NAND, DRAM and foundries. Lots of factors to take into account.
Dylan: It's not. That was the 90s. But semiconductor equipment suppliers are. Think about it: If orders drop, it's because the chipmakers don't see a need to ramp up. If they don't, it's because they see slowing demand, because computer makers will be selling fewer computers, because businesses have delayed orders, because the economy is slowing down. I think the theory still holds water. And, btw, there are reports Apple is cutting production orders, the Chinese see slower economic growth, and the German economy is not so wunderbar anymore.
In the 90s, one of the more reliable future-looking economic indicators was the quarterly forecast for Applied Materials. In the 50s, people said "As GM goes, so goes the country," but by the 90s it was AMAT's outlook. I hope things have changed. I'd hate to think a contraction in semi eqpt makers portends another recession.
I think a lot of signs point to a bounce back year for equipment spending. They could really use it, and chip makers are going to have to buy more gear to continue scaling. I am expecting cautious optimism.
Having read about AMAT's Analyst Day meeting and having just heard Lam talk, they sound more bullish to me than this report does. Of course, part of the job description of a CEO is to sound bullish. But still, as Lam pointed out, there has been a lot of consolidation in the industry over the past few years, meaning that strong survivors can make good money even in a market that isn't as robust as it used to be.
So far, too early too tell what the vibe is like at the show. In recent years it has been pretty subdued, but I haven't spent as much time on the show floor as I used to.
I'm sure many people are enthused by SEMI's optimistic forecast for 2014. I know we all hope it is on target. The equipment industry would dearly love a boom year. But SEMI's forecast (contraction this year, double digit growth next year) sounded familiar to me so I checked. Sure enough, it's similar to the forecast SEMI issued last year at this time. At that time the group was calling for a 10 percent increase in equipment spending in 2013. Obviously that is not coming to pass, so everyone is hoping for a big year next year.
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