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Politics : Formerly About Applied Materials
AMAT 341.36+1.3%3:59 PM EST
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To: advocatedevil who wrote (42308)2/17/2001 8:34:45 PM
From: FJB  Read Replies (2) of 70976
 
What about the second and third tier semis? It costs plenty to purchase and maintain new equipment. It takes longer to implement new technologies and then get a return on the investment.

The reason why Applied and some of its competitors have increased margins in recent years is because they not only sell equipment these days, but also process know-how. There was a very interesting chart presented by Sue Billat, or Applied maybe. The percentage of sales spent on R&D for semiconductor companies has gone down over the last ten years, while it has increased dramatically for equipment companies.

If you take a look at R&D spending by Taiwanese foundries, it is rather low compared to IDMs, but they are keeping up with most IDMs in device performance. The same goes for second and third tier manufacturers. They have very little process knowledge. They basically buy process knowledge from the equipment guys along with the hardware.

However, this may be a more severe downturn than the current stock prices indicate, or it may not. Considering the state of IT spending at end users, it is hard to argue against your position. OTOH, it is almost certain it will be nothing like '98. Place your bets.
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