NFTRH; Semi Industry Direct Info

Reference back to January of 2013.  In an NFTRH update we talked about a contact of mine who supplies the equipment sector of the Semiconductor industry, who advised that the industry was on a “ramp up”.  The equipment companies are the likes of AMAT, MKSI and LRCX who gear up for Semiconductor Fab cycles.

My own experience in manufacturing led me to conclude that the Semi build would lead to strengthening manufacturing (ISM) and ultimately, ‘jobs’.  Now, this probably did not all come about in Swami like fashion in one update, but it was a theme that was born that day and brought forward in a workmanlike, routine fashion.  We are all about no hype, and all facts… as best as we can interpret them, anyway.

So I just called my contact and got an update, fresh this morning.  While this information from Semi is to be taken with the grain of salt that this industry is renowned for its sudden revisions, here is the current theme… it is bullish.

Record Fab Equipment Spending to Increase to US$42b in 2016

His ‘boots on the ground’ information was that his customers (again, the early cycle equip. guys) are still strong.  I asked about other industries and he advised that Aerospace and Defense remains strong (aren’t they always?) and Medical is steady (isn’t it always?).

Now, had the Semi projection fully factored a strengthening dollar?  Is the dollar going to resume strengthening or will the Fed manage to jaw bone it down and keep the party going?  Lots of valid question that we have to manage along the way.

To complicate matters, a website reader sent me information that the cause of today’s big down move is that MCHP issued a warning that included words about a “broad based industry downturn”.

The bottom line of this update is that there appears to be nothing wrong with the Semiconductor sector based on boots on the ground information from the early cycle area of the equipment sector (which led the whole bull phase in Jan. 2013) and yet a chip maker is warning on the industry, not just its own business.

As for technicals, note this morning’s public post SOX on Key Support Test.

We should stay on the path we are on, focusing on the US dollar.  If they manage to get it under control, the Semi’s could indeed be making a test and leading a big buying opportunity (in light of the equipment strength).  If the USD gets out of control to the upside, the Semi’s could do the opposite (because in the equipment industry, today’s strength can become tomorrow’s revision).

I just wanted to share all my up to the minute thoughts on the sector and its implications.