Wow, you'd think he did something really unpatriotic, like burn the flag or confess he's one of the 10 Americans who don't watch "Survivor." But all Jonathan Joseph of Salomon Smith Barney did was suggest that after a two-year trip to the moon, the semiconductor industry may be getting ready to return to earth sooner than some stargazers have predicted ... or desired.
Joseph asserted in a July 5 report that because of "slowly reversing industry fundamentals," the semiconductor sector could experience a palpable slowdown over the next six to nine months.
That provoked the snipers to open fire, and they haven't quit yet. But is Joseph's thinking that out of whack, compared with those who believe the current industry upcycle will last at least another two years and probably longer? The only fair answer to that question is another question: Who knows?
For one thing, the semi industry is renowned for its volatility, making forecasting a real crapshoot. Joseph points to some indicators he believes might suggest a slowdown. These include capital-spending growth perhaps peaking this year; unit growth falling consecutively in March, April, and May; lead times for certain components beginning to contract; ASPs for some commodity components starting to moderate on the spot market; and inventories rising at semi companies and CEMs.
Joseph's critics retort his data is woefully incomplete, or in some cases actually demonstrates the upcycle still has legs. Rising inventories, for instance, can suggest the need to keep supply on pace with continuing voracious demand.
Fair enough. Take your pick. Before you do, though, let's throw in more deeply embedded structural variables whose impact on the semi industry, and all industries, tends to be much greater than the epiphenomena both Joseph and his critics tend to emphasize. There is, in particular, the increasingly intertwined nature of the global economy. What happens in one region can have devastating, seemingly "out of the blue" effects worldwide. How many, for instance, foresaw the sudden plunge of the Mexican peso and the havoc that would wreak? Or the recent Asian financial crisis and its powerful undertow? Can anyone say-as billions of dollars daily are zapped electronically into one region and just as suddenly pulled out-that another such crisis isn't just around the corner, with all that might portend?
The truth is that today's global economy is lawless. Anarchy rules. Thus all we can do, like Mr. Joseph, is read the tea leaves and then heed the signs posted on the country's dangerous byways: "Buckle Up!"
Barry Greenberg is a managing editor at EBN.