Hi Ohkami; Re: "Hello Bilow, here are two arguments for the engineer re cost position:" Thanks for the response.
Re: "1. Financial: Size of recent inventory write-downs at MU and IFX" It's not trivial to compare these things.
(a) You have no idea what the product mix of inventory is at Micron nor what the product mix of inventory is at Infineon. That means you're going to be comparing apples to oranges. Since they don't publish the details of exactly which parts they're making you have no way available to figure out how to compensate for this. In addition, both companies make a lot more than just DRAM, and even the DRAM market is split between a wide variety of niche, leading edge, and mainstream parts, each with different prices and different price ratios.
(b) Infineon isn't a US based company and doesn't file reports with the SEC, as far as I can tell. Because of this, you really don't know what the accounting rules are.
(c) Even if the two companies did have the same GAAP rules, we all know that there is massive variablility in how those rules are applied. The two companies could have different reasons for choosing slightly different accounting policies.
(d) You're looking at quarterly figures, and these are very dependent on the pricing for DRAM at the end of those particular quarters. Micron and Infineon aren't even on the same quarterly accounting period. Micron's quarter (the one you're quoting) closed on August 30, 2001, while Infineon's quarter presumably closed on September 31, 2001. Thus it's impossible to get the same accounting period for the two companies. In fact, the figures for September 31 for IFX were 142 million Euros:
"EBIT decreased to a loss of Euro 882 million, down from a positive EBIT of Euro 807 million in the same quarter last year and down from a loss of Euro 598 million in the third quarter of this year. Infineon's loss was due to increasing pricing pressure in all segments, further order cancellations and costs of carrying currently unused capacity. The loss also reflects restructuring charges of Euro 117 million, inventory-write-downs of Euro 142 million, acquisition-related expenses of Euro 67 million, impairment charges of Euro 14 million and gains from the sale of non-core businesses of Euro 33 million. Without these items, EBIT amounted to a loss of Euro 575 million."
biz.yahoo.com
(f) Re: "MU market share is about twice that of IFX"
If the figures for Infineon include their share of ProMOS, then Infineon makes a little more DRAM than Micron. If they don't include ProMOS, then Micron is 64% larger. Oh, and this link tells which companies are paired together:
tice.com.tw
Re: "- level of inventories as % of sales is equal or lower at MU than at IFX" As ususal, no verification. In fact, even if you find the figures for inventory for Infineon and Micron you still can't do a straight line comparison because the companies don't have the same product mix.
Re: "inventory write down is the difference between market price and cost." This is true, but no two accountants are going to calculate the same price or cost for any single given company.
Re: "as market price is comparable for IFX and MU ..." They're not selling the same products. For example, I would bet that Infineon's product line averages out to larger bit sizes. Micron's product line includes SRAM and Flash which Infineon doesn't even sell, while Infineon sells a whole bunch of ASIC parts that Micron doesn't get near. As far as comparing the write down costs for the two companies, why don't you explain what the ratio of inventory in DDR SDRAM to PC100 was at Micron and compare that to the same ratio at Infineon. The fact is that you can't because you don't know.
Re: "... MU must have written down from a considerably higher previous cost position." Too many incorrect assumptions to get to this conclusion.
Re: "2. Technical: Die sizes" This is silly. No real ASIC engineer in the world is suffering under the delusion that cost is proportional to die size. You're basically missing what I've been repeating. Micron doesn't push the envelope of technolgy, so their equipment is cheaper. Cheaper equipment makes cheaper semiconductors.
Basically, you're taking an extremely complicated situation, and trying to simplify it.
Re: "IFX dies size is about 10% smaller than that of MU and Samsung." If the die size difference is only 10%, then how did you manage to already "prove" that Micron has a 2x cost disadvantage? Give me a break.
Re: "Everyone else is way bigger, 66 sq.mm. or higher." Maybe you didn't notice, but all the Taiwanese just announced that they're making money on DRAM. How are they doing this with those big dies? The fact is that die size has little to do with cost.
While it's true that reducing the die size for a particular semiconductor line will reduce the cost of the parts manufactured on that line, it is not true that a line that uses a smaller die size is necessarily lower in cost than another line, with completely different equipment, that happens to use a larger die size. If the cost of silicon were the dominating factor in DRAM prices it what you're assuming would be true, but it's not. The dominating factor in DRAM costs are equipment related, not silicon related. Shrinking is how you get more out of your equipment, but these companies do not have the same equipment, and when they do happen to have the same equipment, they didn't buy it at the same time, or at the same price.
Re: "A major reason ..." This is all very fascinating, but it doesn't explain why Infineon has failed to take over the DRAM market. In fact, Infineon has repeatedly announced that they are going to reduce their exposure to the DRAM market as much as possible. If their costs are really so low, why do you think that is? The basic facts are that die shrinks are wonderful things, but die size is not a good way to compare different lines for cost effectiveness. Why not compare the lines on the basis of how much their electricity costs? Why not compare labor costs? Why not compare taxes? Why not compare how much retirement benefits they have to pay? Why not compare what kind of environmental rules they have to follow? Why not compare their ratios of capital equipment cost to sales? That last will give you a better estimate of who has the lowest cost production, but even then, as I've said before, the two companies are not comparable. Micron is a pure DRAM play, Infineon is not.
Re: "The other players in the deep trench camp are, of course, Toshiba and IBM. So, one could reasonably hypothesize that MU may actually be interested in acquiring deep trench experience in the Toshiba deal." If IBM and Toshiba are such cheap makers of DRAM, then how come Toshiba is exiting the business, and IBM pretty much only makes parts for internal consumption? As far as what Micron plans, my guess is that they will convert the Toshiba lines to their own process:
Micron's CEO, December 3, 2001
Appleton: Trench architecture is no barrier. If we did acquire fabs making trench DRAMs, we would simply convert them to our manufacturing processes, just as we did with the TI fabs. [The former TI fabs and Micron both use a stacked DRAM architecture.]
ebnonline.com
I mean really, don't you think that it's a hell of a note that the companies that you're pumping as having the best DRAM technology are all running like hell as fast from the market as they can? And if Infineon is such a much better producer of DRAM than Micron, then:
(1) How come Infineon didn't ramp up their production during the good times? You'd think that the guys with the lowest cost production would have taken advantage of their advantage.
(2) How come Infineon couldn't come up with a deal to buy Toshiba's plants?
-- Carl |
