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Politics : Formerly About Applied Materials

AMAT 319.11

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3:59 PM EST

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To: Jacob Snyder who wrote (53997)	10/9/2001 4:37:21 PM
From: Sam Citron	Read Replies (1) of 70976

No Exit. It seems to me that there really is no exit strategy for money losing DRAM firms worldwide. Having a domestic high tech infrastructure is seen as a strategic priority for development planners. Initial motivation may be a mixture of import substitution, export promotion, job creation and pure prestige. So fabs get easy credit and subsidies. They are used to losing money in their initial years of production as they have to use forward pricing in spite of low initial yields. Later on as yields improve, they get caught in the price wars typical of commodity markets. Exit would be a major political embarassment. Heads would roll. There is still great commitment to these firms, in spite of their lack of profitability. Some may be viewed by their lenders as "too big to fail". Furthermore, many of these nations may lack a structure of bankruptcy laws that could smooth the way for exit.

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