The last semiconductor cycle was in 1997 during the Asian economic crisis. The semiconductor [ Intel,AMD, Texas Instruments] and the semi-equipment maker [Applied Materials, KLA Tencor, Teradyne, Novellus] stocks were quickly shot down. The current cycle has not spared even the giants – CISCO, Oracle, Microsoft.Teleco equipment makers Nortel, Lucent, Nokia have had their stock prices fall by  50% in view of the lack of capital spending by the major carriers such as Sprint , MCI WorldCom, AT&T, etc. In turn the food chain of suppliers to such equipment makers , companies making OC192 chips, Lasers for Fiber Optic cable  -Applied Microcircuits, PMC Sierre, JDS Uniphase have lost stock value in a similar fashion. 

 Shortening product cycles, and technological change [optical switches], can make revenue growths and profit margins move stock prices dramatically, as they have done recently.

In the electronic industries, the increased commoditization of products has made a basic rule – that of falling prices.

Historically, fiber optic cable still must be laid out for the main back bones of China and India, Eastern Europe, Russia, South America with Africa coming in last. The last mile problem can be solved only by mobile cellular base stations. This means that Texas Instruments with its industry domination in Digital Signal Processors and Corning with its LEAF Fiber Optic cable stand to gain most out of this remaining build out of telecom networks.

B2B, supply chain Customer Relationship Management software applications will be rolled out eventually in the next 5 years over the Internet. The users will be the US Department of Defense , IRS, and other US Government organizations such as the GSA and the motivation will be the cost savings. Companies such as Oracle, Microsoft, IBM will muscle into the markets. Others such as Seibel, I2, Ariba, Commerce One will also win market share in partnership with the big boys.

Companies with multiple product line and sustained and compelling business value will win in a globally networked environment.

A big factor is going to be IT education. Stock market Fund Flows into the US markets have gone down from a $4.5 billion per week to about $800 million per week according to Trim Tabs Data. 

 

Lessons for the South Asian Markets

1. Learn to develop deep expertise in Information Technology, as most of the next ten years of high growth will be in this sector. South Asian Financial experts, bankers, account managers must understand what the information technology components are. Most of south asian  bankers have only Textile industry domain knowledge. Information Technology education would be an obvious neccessity.

2. Financial Transparency must be developed as a policy and implemented as a process in all financial institutions. Commercial Arbitration mechanisms, Small Business law courts are all desperately needed.

3. Laws & Regulatory Frameworks, in Telecomm, Internet  Cyber Laws [ domain name disputes , net taxation, credit card transactions, Intellectual Property, Patent Laws, Security of Data[ Cryptography  Digital Signatures, Public Key Authority, Certificate authority al need to be established ] , Insider Trading Laws, Child Pornography Laws must be prepared on an urgent basis.

The financial health of South Asian companies is anything but good. Company Balance sheets , Bank Loans and the general accounting standards remain poor in general. Banking Branch reconciliation is manual and in some cases overdue/ outstanding for years.

4. Basic Export Oriented B2B sites for agricultural products and textiles/knitwear, Water and Irrigation Data Bases and Networks  and Defense Information systems would be obvious areas of application. Online Data Bases for Public companies similar to EDGARS would be a starting point. Later, other accurate DataBases must be built on Statistics for various economy and industry sectors.

5. Micro Financing ventures such as the Bangla Desh Grameen Bank and other Venture Capital markets  should be encouraged to develop Information Technology; India is moving aggressively in this direction with help from the US Indus TIE group.

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