Chipmakers have good news to report and Q2 results will prove it.

Normalcy is returning to an ever more connected world, setting the stage for semiconductor stocks and their capital equipment suppliers, to break to the upside as the business cycle recovery rests on technology advances in a flurry of new products. In particular, the chip equipment stocks have lagged of late, but the coming upturn promises a longer duration move to the upside because of underinvestment in new productive capacity. This prospective restoration of the semiconductor technology base is similar to what occurred in extractive resource industries from 2003-2007, and could similarly fueled a strong share rebound.

As a succession of financial and economic crises subsides, the Internet has resumed its evolution, seemingly subsuming every element of human conduct. Demonstrations and riots in Iran are Twitter events, while businesses around the world depend on linked communications and supply outsourcing--transport and delivery cannot be imagined without it. Electronic communities link people either locally or in far-flung locales, made possible by this universal medium. Wireless transmission of richer media at broadband speeds extends it to those on the go, and modem behaving smart phones tether PCs to the net.

The electronic devices by which all this occurs are now commonplace, no longer esoteric items for a privileged few, but with easily downloaded Web apps on highly affordable handhelds. All this is made possible by constant innovation whereby next generation chips are smaller, more powerful and combine into single components what previously took several, if not many. Moore's Law endures. Yet none of this comes cheaply as the semiconductor industry remains the most capital intensive industry in the world, requiring a constant refresh of its productive base with newly advanced production tooling.