David Lentz

I Do Believe in Semiconductors - I do, I do!

Me too -- I like INTC -- EXCEPT as an investment.

As Phil has astutely noted, the principal difference between oil and silicon is that while oil is controlled by a small number of very large companies, there is a large number of semiconductor companies all clamoring to compete to bring us new and ever-more-clever technologies using semiconductors in all kinds of new and innovative ways.

Through the miracle of competition and free markets, this means that there are not likely to be any large pools of profits for the companies to bask in. Intel's goal is to rude the curve of increasing capital expenditures needed to advance the bleeding edge of innovation down to ever-smaller sizes (produced on ever-larger wafers for somewhat higher costs per wafer), driving the cost to the consumer ever lower while improving their bang for the buck. Intel's hope is that eventually, the cost of building new fabrication facilities will be so high that they will escape the horde of smaller competitors nipping at their heels.

Imagine if the petrochemical industry was as successful as the semiconductor industry and approached their business in the same manner, squeezing more and more useful energy out of every drop of oil while concurrently expanding the known reserves at the consistent and predictable rate of doubling them every 18 months. ExxonMobil shudders at the thought.

While a tremendous deal for the consumer (that would be me and thee), it doesn't paint a very pretty picture for the investor. Better to invest at points farther up the product tree, in the companies that make things from chips or the companies that sell software (the ultimate product, one requiring no factories to replicate it).