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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 148.83+3.9%Nov 19 3:59 PM EST
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To: Ian@SI who wrote (7910)6/7/1999 10:42:00 PM
From: Katherine Derbyshire  Read Replies (2) of 10921
 
>>I do agree that sooner or later, the chip makers will get their act together in terms of
building supply to meet demand. I just doubt that they're going to do that this time;
and maybe not next time neither.<<

I would say later rather than sooner, and probably never. To build to demand, the chip makers first have to know what demand is going to be 18 months in advance. Then they have to know what their competitors are planning to build and how successful their competitors will be, also 18 months in advance. Both of those things are very hard, and if they guess wrong they're either stuck with a $2 billion hole in the ground or left behind as the industry grows without them.

Then, even if it were possible to predict how much capacity is "enough", they'd still be stuck with a certain minimum effective fab size of, oh, 15,000 wafer starts per month or so. At an ultraconservative estimate of 100 die per wafer, that's 1.5 million die per month per fab, which is a pretty blunt instrument if you're trying to match supply and demand.

And even then, as I've pointed out before, anytime you have stable prices you're going to have wild cards appearing in the form of new supplier companies and/or countries that are willing to sacrifice profits for market share.

Katherine
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