Intel cheered investors further this week when it reaffirmed its capital-spending budget for 2001. But a bottom for the industry might not have been reached yet. From our viewpoint, the rebound in capital spending for capacity purchases is still several quarters away. Fleming believes Intel has already ordered another 32 percent of its planned 2001 expenditures for delivery in the second quarter, which suggests that second-half spending could plummet. And as the maker of computer processors rapidly plows through its budget, a big manufacturer of chips for wireless phones is doing the same.
Some analysts believe the worst has already passed.
ABN AMRO's Nikolai Tischenko, who began coverage of KLA-Tencor this week, and Prudential Securities' Shekhar Pramanick argue that things will gradually improve during the next few months. Our proprietary checks also show that in the handset market, things could be incrementally improving for one of the largest handset manufacturers. But even those manufacturers aren't so sure. Gateway, which reported quarterly results Thursday, refused to give a specific forecast beyond predicting profits in the second half of the year. And on Friday, the third-largest maker of cell phones pointed to more weakness ahead.