Semiconductor and Semi-Equipment Analysts - Their Calls Message Board

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Technology Stocks : Semiconductor and Semi-Equipment Analysts - Their Calls

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To: Nevin S. who wrote (79)	7/31/2000 4:38:56 PM
From: hhieslmair	Read Replies (1) of 195

Yes, thank you for that feed back. You are correct. Competing companies each build their own fabs in the hope of grabbing more market share in the future. When all the fabs come online there is suddenly a glut. If more companies contracted to foundries, the foundries would have the birds eye view of aggregate demand and build out a more appropriate number of fabs/capacity. Indeed, as foundries have better production technologies, more IDM's will use foundries for some or all of their production. The business argument for outsourcing 10-30% of chip production to foundries is very compelling. Foundries are a great hedge. If chip demand is hot, a particular company can increase outsourcing to a foundry. If chip demand is sustainably high, that company could then build out their own fab/capacity. This is a great strategy for many chip companies such as LSI, NSM, etc. This will have a tremendous dampening effect on the chip capacity cycles. I'd like to quote you in the next revision of "No more semi cycles" - is that OK? HH

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