I wanted to share something that perhaps few people would see. My background was in semiconductor test. I spent almost 30 years in mixed-signal semiconductors working for a vendor of test equipment and then with a semiconductor company. Semiconductor testing is a massive market, every electronic item you buy is tested at the device/computer chip level, then as a circuit board filled with those components to verify functionality, and then as an end product.
Billions of dollars are spent on test equipment as an economy is expanding to meet the needs of manufacturing consumer products. For the testing, the tester is mated to another piece of equipment, called a handler, that together allows both pieces of equipment to test hundreds of devices an hour (perhaps thousands of devices an hour if it is quick to test). Entire manufacturing floors overseas are filled with this pairing of equipment that runs night and day, if needed, to crank out tested computer chips to be sold around the world. And yes everything gets tested.
Many people talk about the economy, as a whole, being somewhat sinusoidal. However, in the semiconductor world the test equipment companies are almost full ON (expansion) or full OFF (contraction). Test equipment companies are farther out on the ruler and it’s more of a square wave for companies that develop test equipment. As an economy pulls back and even if equipment has been ordered the semiconductor companies will delay delivery or even refuse the equipment (if they are big enough).
One of those test equipment companies is Teradyne. Mixed-signal, digital, memory, RF testing, etc. – they are a powerhouse in semiconductor testing all around the world. If you are looking at earnings, and they ARE respectable this quarter, then there must be something going on in the forecasting thru the end of year that caused the drop and the massive volume spike.
When looking at the semiconductor industry a viable front runner would be to monitor the test equipment manufacturers. It’s just one possible future, but I have seen that square wave before. Just sayin’…….