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September 22, 2005
Hydrogen and chips alert, Thurs., Sept. 22, 2005, 7:29 AM
On Wall Street, information is king. Information of the kind I received from a reader is immediately jumped upon and put into the market in the form of purchase and sale decisions. And that's what moves markets.
Dear Bill; I love your site! I just thought you might like to know that "Katrina" managed to damage the nations supply of Hydrogen Gas. This is essential for the manufacture of Silicon Chips. Those who know it i.e. the engineers, insiders are bailing out big time. Read about it by doing a google search- Hydrogen gas / silicon chips. A sample of what you will find. Disclaimer: I own no stocks in the silicon sector / I have no specific interest in the sector. Thanks. /J"
A friend of mine likes to say: Life's a (disaster), and then you die." I can't knock that guy because, last time I checked, he was counting his net worth in the hundreds of millions, and living in paradise.
But out of disasters like Katrina come real life problems that have to be managed. The reader above has alerted me to just one of those. I am certain there are a great many others.
And that's life: crisis equals opportunity.
Quoting liberally from Michael McManus, DigiTimes.com (21 Sept-05), reproduced in the EETimes linked article:
It's too early yet to fully understand how the shutdown of a New Orleans high-grade hydrogen gas facility of Air Products & Chemicals (NYSE: APD) will impact the manufacturing of discrete, higher-voltage semiconductors employed in power-management applications. But this one you can really blame on Katrina. That plant, which had produced one-third of the nation's needs will be out of service for several months. Air Products' leading competitor Praxair (NYSE: PX) is working hard to make up the shortfall.
So how do traders deal with this?
The chip industry ETF (AMEX: SMH) is likely to come under further pressure. In addition, the companies that purchase APD products will likely have to cut back on production. Unfortunately, I don't have a handle on that. But industry insiders would know the names. Besides, the customers of those chip manufacturers would encounter supply problems. And finally, the APD competitors would likely have unexpected pricing power, so you would want to have a look at the Industrial Gases sub-industry of the Basic Materials sector (GICS 15).
Industrial Gases Hourly data charts
Industrial Gases Daily data charts
On looking at these charts, I have no idea why PX would be down the same as APD. You'd think it would be trading up as a result of the ills that have befallen Air Products in New Orleans.
Maybe insightful readers can tell me what's going on here.
First follow-up mail:
Dear Bill, I am a semiconductor research engineer.
While small amounts of hydrogen are used in most chip process sequences, the hydrogen shortage alluded to will seriously affect only those companies that use epiwafers to make discrete, higher-voltage semiconductors employed in power-management applications.
The power semiconductor group is a fast growing but relatively small part of the overall semiconductor complex. The major companies include Cree, Diodes, International Rectifier, IXYS, On Semiconductor and Fairchild. Of these, Cree would be the worst affected in my opinion since making epiwafers is a huge part of their business.
I have no stock/options positions in any of these companies. /K"
Posted by Posted by Bill Cara on September 22, 2005 07:29:38 AM | Category: 15 Materials , 45 Info Technology