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Technology Stocks : Semi Equipment Analysis

SOXX 312.18

-0.2%

Dec 9 4:00 PM EST

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To: The Ox who wrote (10332)	6/26/2003 7:49:52 PM
From: Big Bucks	Read Replies (1) of 95541

I doubt that few, if any, Americans realize that once Asian manufacturers have >85% of the global chip manufacturing capacity that they will have huge pricing leverage along the lines of OPEC with which to dictate future chip prices. Up to this point there has been nearly cut-throat pricing due to competition, and that competition is driving many companies out of the chip manufacturing business. As more and more non-profitable companies drop out it leaves fewer competitors, mostly Asian foundries with leading edge technology capabilities. Most of these companies are subsized by their governments with various incentives which gives them and unfair advantage over US and European companies who are trying to compete. True, labor costs are dirt cheap and environmental concerns and regulations are of low concern in Asia, but eventually dominating companies who continue to specialize will corner specific market segments and be able to demand higher prices. Where else will purchasers of chips be able to go to negotiate better pricing if there are no other global fabs with the necessary production capability? In 10 years there will only be a small handful of US chip manufacturers with the experience and technological capability to compete and then only in specialty niche market segments. If Taiwan eventually decides to politically rejoin mainland China it would likely mean that >60%-70% of global chip production would be under the control of the Chinese government. Even now mainland China is building new chip manufacturing plants, and several Taiwanese companies are sponsoring these endeavors looking toward the future. The question is can the US and European companies afford to let their Asian competitors drive them out of business over the long term?? Also, why isn't the US government giving similar tax breaks and other financial incentives to US high technology companies to insure that they can afford to compete in the global market place and maintain our technological edge and expertise of the workforce. The US has lost too many of the technologies that were developed here to Asian companies.....along with the jobs those technologies provided. BB

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