Oh Tim <<It would be foolish to think that Cymer will be imune to what is happening to Intel this week. I believe Cymer management is basing their growth projections on what they know of the customer demand today. However, fab plans do get delayed and even scrapped when market demands change. Investments in fabs will slow or stop if they sense a change in the timing of the market.
There are three recent news items that could indicate a change in the semi market. The first is the Intel fab delay. The second is a slowing in the demand for flash memory. The third is the appetite for low cost PC's which may cannabilize the high end CPU volumes. >>
(a) read the news from Intel. They announced there was no plant delay - just a reshuffling.
(b) "investments in fabs will slow or stop if they sense a change in the timing of the market". Listen. You've got both Cyrix and Advanced Micro gearing up to obtain higher yields (where Cymer's lasers are in this equation), two Intel competitors. Cymer lasers allow chp makers nearly double the yields obtained from the same wafer. You've got Samsung already using Cymer lasers in prouduction down to .25mu showing Intel how to make more money out of each wafer. What's Intel going to do? Oh, they are going to say, hey there's a change here folks, our business is being eaten up by the faster lower cost players, guess we'll no longer apply Moore's Law, the change of wind stinketh.
(c) "the second is the slowing in demand for flash memory". What? There never was a speed up in demand for flash memory! How can you slow a boat that's already moving at a constant speed? The demand for flash memory has been increasing quarter over quarter, not decreasing - Intel's comments stated that THEIR flash memory, due to its COST (from $3.5 to $5 per mgb) was not witnessing INCREASED acceleration, but was continuing to grow. Besides, there are other forms of memory coming on line which would (1) significantly increase the demand for chips while witnessing a decreasing demand for flash - one will replace the other. This particular replacement could cause the need for chips to explode - literally!
(d) "the third is the appetite for low cost PCs". Tim, Tim. If we have a family that can afford a $2,000 computer, how many families can afford a $1,000 computer - two more families? The answer is closer to 2 1/3 times more families. The demand for PCs grows exponentially as the price of the PC drops. You have 30% of U.S. households that feel like they can afford a computer at $2,000. You have nearly 70% of U.S. households that can afford a $1,000 computer. In Mexico you have less than 5% of the families that can afford a $2,000 system, but a $500 to $1000 system is affordable by nearly 25% of the populace (a 500% increase in demand). The same is true all over the world. Fully read Compaq's latest report. Compaq was surprised that they were able to sell SO MANY MORE $1,000 systems and make money doing it! The gross margins were only slightly smaller on a $1,000 system than on a $2,000 system but they sold a heck of lot more $1,000 systems than anticipated and this was done without a major marketing effort on their part!
A recent poll in China revealed that owning a computer was more important than owning a car. Who is going to supply the 100 million families in China with a computer that is affordable? Dell, Compaq, HP, IBM all have plants in Southern China now and are building systems as fast as they can make them! Check it out. What do you think is helping fuel European's new desire for computers? It's the $1,000 system! Europeans are frugal by nature. The $1,000 system is what is giving the European family a new look at computers. Think about it.
It is easy to be negative Tim by reading a few articles twisted in this or that direction. There is more than one company in the world. Intel is not alone. Cyrix supplied Compaq with the inexpensive chips for the $1,000 systems. Intel was too busy babying their gross margins and love for $2,000 systems to notice. Look into how Cyrix is going to further expand their yeilds and reduce costs even further for their chips! You'd be surprised to find how Cymer's systems fit into this equation. |
