Sridhar, thanks for your response. I have this weird feeling that if someone went back and culled through this entire thread and summarized the best of both sides we'd end up with a clearer assessment of the risk/reward re: investing in MU than what "the pros" are putting out. When I read TK's bulletin, my initial reaction was - wait a second, this is what "professional Street research" looks like? and from someone who is supposed to be "the best of the best" at that? (Are you getting the feeling that I wasn't that impressed? <g>)
One of the problems I'm having in trying to work out some of the angles is the whole concept of "crossover" both in terms of production in the fabs and demand in the market. Maybe it's semantics to some extent, but it's a word that's sort of slippery for me.
To say that the Asian players have shifted over some of their production lines to 64's isn't necessarily saying that they're throwing in the towel en masse on the 16's. I don't know when it can be said that "crossover" has occurred (i.e. 4, 16, 64 on a percentage basis of production capacity), but I'd assume that Samsung, Hyundai, LG and the other Asian players still are cranking out enough 16's to meet demand and have more than enough capacity to meet any sudden price or demand surge. I mean, these guys have been gradually transitioning to an increased capcaity ratio of 64/16 for months now and the price on the 16's hasn't blown through the roof. That tells me someone's still playing ball on the 16's.
The fact that the South Koreans are shutting down production for several days doesn't mean that the guys on the loading docks won't be working. I guess the question for me is sort of - what's the upside/downside to shifting some of your productive assets away from a stagnant market and getting a jump start on what will possibly be the key product in 1-year (my own rough estimate)? I'd say - the upside's decent. And I think the problem is that too many people came to the same conclusion and you have a lot of supply hitting the market before the demand's there. And you're right, the timing of market crossover from 16's to 64's is VERY iffy.
You could very well be totally correct in assuming MU is going to nail the timing short-term. That's great if the DRAM market/world ends next quarter or the quarter after that, but this is a long-term war. The differences between shareholders of companies like NEC, Samsung, etc. and those of MU are huge. The market for MU's securities plays it quarter to quarter, which means that to some degree MU has to play it Q-Q as well, and overemphasis on short-term quarterly performance can produce myopia. I'm not very familiar w/ how the S. Korean, Japanese or Tawainese markets trade, but in very general terms I'd say they are more patient. If the "beat the estimate" crap goes on on those markets, I'd assume it's to a much lower degree if at all.
One question I'd like to ask TK re: the "six months sooner" comments would be "when had you expected them to start transitioning to beging with?" I don't view MU as a "resource rich" concern. So, they are allocating limited resources to position themselves to produce a premature product, one which they will have to work their "cost reduction" magic on without the benefit of their Chief Technology Officer.
If the posts on this thread are correct, Lowry is gone and I had understood him to be the CTO (if I'm wrong, I'm wrong and someone should correct me). One would assume that the CTO would have had a lot to do with whatever cost reductions through manufacturing efficiencies MU was able to achieve in the past. That would cause me some concern. I'd also question whether the production of 16's and 64's is close enough that whatever manufacturing techniques they developed to push down the AUC on the 16's is readily applicable to the processes on the 64's. I'd assume the processes would be more numerous and/or complex, but that's an assumption I'm making w/o a tremendously deep knowledge of what actually happens down there in the clean-rooms.
I'd write more, but I'm on the verge of heat-stroke (someone had the bright idea to put heavy bars on all the windows of my Brownstone, making AC problematic. Now I'd call that a flawed design model <g>)
Good trading,
Tom |
