Comments on Article
The leading indicator concept discussed by Wu et al. (2006) seems like a good way to track trends in demand. However, for forecasting revenue and for forecasting planning capacity, different data are required. It can be useful in inventory forecasting, but for predicting demand growth, there is some degree of uncertainty particularly where technology substitution comes into play. I would add that, since the article focuses on the semiconductor industry, there is also the factor of disruption to take into consideration. In my opinion, the rise of the cryptocurrency market has caused significant volatility in this industry, with the sudden demand on semiconductors used by cryptocurrency miners, who seek to profit from the new crypto trend. No forecasting model could have predicted this sudden wave of demand that has seemingly been sustained for years and that has also been impacted by supply chain snarls caused by the 2020-21 lockdowns. Again, no leading indicator model could have predicted the pressures caused by a lockstep global lockdown campaign.
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A much better strategy would be to adopt alongside such a model a macro-perspective that examines as much as...
…the world, one has also to think about the extent to which demand is motivated by the extent to which capital is readily available or the extent to which the average consumer is capable of obtaining leverage. Historical demand for a demand is not a guarantee of future performance in and of itself, as
history has been largely changed since the great financial crisis of 2008, which occurred two years after the publication of this article. Central banking intervention has so altered the very nature of markets and consumption that understanding where we are in a cycle at any given time is now even harder to do…
