Our readers know well our thesis that semiconductor companies have ordered too much capacity and need to scale back. We believe this is happening now and will have to continue for some time, since the over-ordering has already gone on for more than a year (see above chart).
So what do we make of this story?
Apparently spurred on by the higher-than-expected fiscal second quarter order outlook from Applied Materials (AMAT), the semiconductor equipment stocks are almost all rallying in after hours trading. Applied itself, which was off slightly earlier, has recovered nicely. Applied CEO Mike Splinter indicated that the fiscal first quarter likely was the tough quarter for orders in logic, foundries and display.
Not exactly in line with our outlook on semiconductors and semi equipment, is it? But it is exactly in line with our expectations of what Mike Splinter would be saying. Back in November we said:
When we wrote our plea for intervention, we noted that Mike Splinter called the bottom of the last slowdown for about eight consecutive quarters, so what should we expect? Which brings us to a new (albeit slow-paced) drinking game. From now until there is actually a bottom in semiconductor equipment orders we will take a shot each time Splinter suggests that orders have/will bottom in the current/next quarter.
Mike Splinter - our Patron saint.