|
Mohan, Part two. Dram, Sram, and graphics chips are in glut. Flash,
Eprom, and EEprom, and PLDs are approaching gluts. Even Digital
Signal Processors, the all-time "non-cyclical" chip, is seeing a lot
of supply coming on stream and I will be surprised if DSP's are not
in glut by this time next year. Every chipmaker in the world saw the
80 percent gross margins of a Micron at the cyclical top and said, "I
want some of this." The # of fabs coming on stream continues to grow,
despite decoy ideas of chipmakers shutting down capacity. Just check
the b to b of the equipment mfrs. The chipmakers are ordering at a
pace nearly as high as at the top. This stuff is expensive and they
will use it. A supply glut can end two ways. Demand can go back to
growth of 40-50 percent a year for pcs, and that is always a
possibility. That rate would give supply a run for its money. But
there is more than just new fabs coming on line. The new fabs are
building chips faster and better, and building faster and better
chips. Also, as they lower the cost of production, they have to
produce more to take advantage of that lower cost. The second way
this ends is when there is capitulation. Some chipmakers have to go
belly-up. Or, ex that, some have to leave certain segments. For
example, in the last Dram cycle, Intel and IBM basically said forget
it. Neither company went bankrupt, obviously, but they either left
or sharply curtailed Dram production. The Japanese capitulated by
refusing to build capacity, letting the Korean's grab market share.
All of this will probably take place, but it is not happening yet and
we are in for the mother of all gluts. MB |
