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
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
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
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
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.