There weren't many heroes in the corporate suite these past two years. Chief executives, seeing sales losses and unmet profit promises, began a round of cost cutting that wiped away 1.5 million U.S. jobs. Their cutbacks in corporate spending on new computers and equipment are blamed for turning a slowdown into a recession.

Firms that bucked the trend, however, are pretty happy they did. At Applied Materials, the world's largest maker of the equipment used by semiconductor manufacturers, Chairman and CEO James Morgan has long preached the value of looking up when times are bad. New hires are given a memo written by Morgan, a veteran of many recessions. Among its aphorisms: "Bad news is good news, if you do something about it."

In March, only a month after reporting a 58 percent decline in sales from the year-ago quarter, Applied Materials opened a state-of-the-art factory in California. Even though industrywide chip-equipment sales fell 41 percent last year, Morgan says that by investing now, the company will be ready when the market turns. After all, the next generation of chips will need to be jammed with even more circuits and will have to conduct electrical signals even faster.

"If you don't work hard in the downturn, you miss out on a great potential," he said in an interview. During the recent downturn, Applied focused on streamlining its distribution system to give it a fix on the location of every part throughout its global operations.

New market. Applied has also pushed hard to expand into China, a market that will probably decide the winners of the next big semiconductor boom. Only 1 of 4 chips used in China is produced there, creating a huge demand for outside firms to come in and provide chip-making equipment.

"We believe that early leaders win. . . . We've been first in our industry to enter areas such as Japan, Korea, Taiwan, and China," Morgan says. The firm opened its first office in China in 1984; Mao suits were ubiquitous at the time, and the firm's progress was slow. But in recent years "the changes are amazing," Morgan says. In 1994, Morgan took Applied's board to China and got it to approve a five-year, $1 million R&D fund for distribution to Chinese universities and research centers. That helped build up goodwill and trust. Now Applied has four offices in China and a training center in Shanghai.

All that effort is paying off. Last October, as many other chip-equipment makers were still licking their wounds, Applied Materials landed a $200 million contract from a Chinese-Taiwanese partnership to outfit a factory in Shanghai.