Mr. Rinnen: Today the industry is in a recovery mode. We declared that a recovery started in April of last year and, obviously, it has been slow initially, but it is picking up steam. For this year, if you look at our chip forecast, for example, it has turned out that we have been a bit too conservative in calling the market, and we have just recently upward revised our forecast from 8% to 11%, and there is further upside to it. What you have is a confluence of positive factors, which start from the top. The GDP growth in the US is coming online, on stream, again, and the US is really the growth engine for the world. With Japan and Europe being slow, the US is starting to pull again this train, and it is starting to move forward. The second factor that is coming into play is that wild cards like epidemics, wars, terrorism have been getting quieter and quieter. I don't want to say that there is no conflict anymore in Iraq or that unfortunate deaths don't occur on a day-to-day basis, but I think if you compare it to about a year ago, what could have happened didn't happen, nuclear conflict and so on ' all of these things have started to calm down, which is good news for business. So, what it all spells when it comes together is that the semi industry will likely see a very strong and healthy 2004. As business confidence starts to grow, business spending will come back. Recently, Gartner started on an IT spending sentiment survey. The results are very encouraging as of late. They are encouraging for this year that actually spending sentiment is moving toward target. Given an underspending in the beginning of the year, this means there could be a budget flush ' a spend-it-or-lose-it attitude toward the end of the year. But really what is more remarkable is how sentiment has moved since the beginning of this year upward for 2004. All of this comes together and paints a good picture for semi's. Why is the macroeconomic picture so important? As you know, there is a lot of talk about saturation in PCs and cellphones. Who is going to buy those? Do I really need a faster PC? Buyers have been sitting on the sidelines and pushing out the upgrade cycles. What will change this mood is a healthy and prosperous economic environment. During the recent down cycle the individual consumers have been rather robust in spending. But corporations have taken quite a conservative look at it, partly because of the issues on the Street ' economic issues and regulation. There has been a very conservative buying sentiment in boardrooms. Macroeconomic improvements and a quieting of the wild cards I mentioned before provide fertile ground for change in sentiment and spending in 2004. Our survey of IT spending sentiment underlines this. And in turn, these improvements will breathe new life into those electronic equipment segments that suffer from saturation.
Tickers included in this excerpt: AMAT, AMD, ASML, CAJ, IBM, INTC, KLAC, NVLS
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