No end in sight for semiconductor downturn
The market analyst predicts that the market will start to stagnate again once the current seasonal rally settles down. This contradicts more optimistic forecasts being made by some semiconductor businesses. Even the most optimistic semiconductor equipment companies, however, are playing it cautiously at present, the mistakes made prior to the devastating 2001-2002 slowdown still fresh in their memories.
According to Goldman Sachs, mass cost cutting is taking place in the industry, as companies seek to come to terms with severe pricing pressure, particularly in the subcomponent and back-end test sectors. "Managements are focussed on cost cutting as they donÕt want a repeat of the 2001/02 downturn, during which companies waited too long to take expenses out of their models," said a Goldman Sachs spokesman.
The company believes that the current downturn could mark the start of maturation in the market, with growth likely to be significantly slower than in the past.
"Even companies that believe that this period of weakness is temporary have been spooked by the relative lack of profitability during the most recent upturn compared to previous cycles," said the spokesman. "This is consistent with our view that the semiconductor equipment industry is a pure cyclical where growth rates are not as high as they have been in previous periods."
The move towards consolidation in the sector is therefore likely to gather momentum.
