November 26, 2001
From the desk of Jane Galt:Semiconductors poised to take off?
Semiconductors poised to take off?
Another from the WSJ: STMicroelectronics Economist Predicts Semiconductor Industry Growth in 2002. I don't buy it. According to him, growth is going to follow the classic 90's cycle:
Mr. Dauvin sees an exit to the current slump through a pickup in business spending on technology, among other things. He said companies' desire for higher productivity combined with low interest rates that encourage capital expenditures mean companies will invest in new high-tech equipment that uses semiconductors.
I think he's missing an important point: the ROI on semiconductor technology for companies has decreased. I don't know anything about the manufacturing sector, where there may be incipient demand if capital costs fall low enough. But I worked in the networking and telecomm area before I went to b-school, and my considered opinion is that there is little demand for new networking equipment or PC/Server equipment at any price. There is little added business value to speeding up your network at this point -- streaming video is more likely to decrease productivity than increase it. Ditto improving the speed of the PC's on peoples' desks -- there just isn't THAT much benefit to improving from a P-200 or PII-300 to the latest processor, while there was huge added value in switching from 486 or low-end Pentium machines to newer models. Applications will continue to be added, and will require servers -- but I don't see it happening at the pace of the nineties. Given that the semiconductor industry hasn't really shed much capacity, I don't see how the sector can pick up.
Posted by Jane Galt at November 26, 2001 08:00 AM | TrackBack | Technorati inbound links