Hi Everybody: I am slightly behind in catching with the posts. But I sensed pessimism as to the valuation etc., Let us not think exactly like others in the herd. IMO Stock market is hysteria and unlike regular medical hysteria, this one is contagious. Let us stay out of it and think very carefully.
IMO Current crisis in SEA, as I pointed out earlier is very good for chip industry and especially for equipment makers. I expect PC sales to boom like crazy. I expect INTC will come out with stand alone PC with less than $1000K and knock the entire Net PC out of the market. It is still doable and maintain a decent margin. The reason is following.
Currently when you look at the chip cost and analyse the process cost from die cost ->Esort-> Initial test->assembling->Testing->Packaging-> Final Testing etcs., Right now the bulk (in % wise) is in die cost. Say about 35-45% and the rest is other activities. Apart from Bulk the next big exp is Packaging. For the purpose of this analysis let us ignore failure rate for the time being. SEA mainly contributes towards testing, assembling, packaging servises. There are tons of companies in Malaysia, Thailand, Taiwan, Phillipines does this service. Nearly 90% of this work is done at those countries. The positive factor is that this service is going to be cheaper by virtue of currency crisis. It is not due to any smart cost cutting measures they adopted. This is a boon to the American chip manufacturers. Secondly the Important area to cut cost is the die cost. Migrating to sub-micron process technology will make die cost much much cheaper. The savings is lograthmic. Further if you move towards 300mm then the savings will extremely huge. This is what the Intel part of the world is shooting for. This will enable Intel to come out with a PentiumII processor (decent speed) and mother board probably less than $150-250 range ( I am just throwing #here). The benefits of falling currency in SEA is much more helpful for WDC, Quantum kind of world. And still be able to market a super duper computer for say less than $1000K and will still be able to at the current margin level.
Therefore guys, dont be negative on this stock due to current SEA crisis. Things look much more rosy now than before the crisis. If I were INTC I will quickly allocate 100% of assembling and testing facilities and lock-in my cost and hedge my currency so that I will be extremely competetive in the market. This will stabilize the currency situation and will lock-in my Cost of Goods Sold part of the equation.
Any comments are, as usual, welcome.
Regards
Kumar |
