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Politics : Formerly About Applied Materials

AMAT 256.41

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Dec 19 9:30 AM EST

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To: Ian@SI who wrote (47303)	5/29/2001 2:20:06 PM
From: Katherine Derbyshire	Read Replies (1) of 70976

I'm saying that Bill McClean said that the chipmakers have spent $250B on capex in the last five years. (I haven't checked, but it makes sense as a ballpark number, $50B/yr x 5 years). At the same time, the annual sales for the chip industry are only $60B/yr greater than they were five years ago. (SIA's web page reports total sales of about $144 billion in 1995, vs $204 billion in 2000) So yes, Ian, that's a $250B one-time charge to fight over $60B in additional recurring revenue. In essence, McClean is arguing that the chipmakers are spending more on capacity than they are earning back in market growth, thereby contributing to a persistent overcapacity problem. And yes, overcapacity will, sooner or later, put pressure on chip company margins, and therefore on the equipment industry. Anyone care to put together a chart tracking gross margins for chipmakers (All SOX companies? All SIA members?) over the last few years? Katherine

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