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Biotech / Medical : Biotech Valuation
CRSP 57.37+0.9%Dec 8 3:59 PM EST
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To: A.J. Mullen who wrote (8304)5/8/2003 4:01:04 PM
From: Ian@SI  Read Replies (3) of 52153
 
OT continued (at the risk of annoying Peter, so I'll refrain from further public Deflation related comments.)

Chip price reduction and the resulting reduction in consumer electronic prices has resulted from typical boom-bust cycles. Too much capacity is built. Prices collapse when demand falls short of expectations. The same phenomenon occurs throughout the economy. It's just much faster with chips than with steel.

DRAM is an extreme example. In 1970, it cost about $4M for .25MB of core memory; today about 256MB of DDR SDRAM can be purchased for less than $100. Clearly, there's been impressive innovation contributing to lowered prices. Prices plummeted because Demand was overrun by Capacity.

This applies to the general economy with Capacity Utilization near 76%. Companies won't have pricing power until Utilization approaches 90%. Thus, the deflationary climate.

Ian
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