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Technology Stocks : Applied Materials No-Politics Thread (AMAT)
AMAT 318.61-3.0%3:59 PM EST
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To: runes who wrote (6382)7/4/2003 7:26:13 PM
From: Cary Salsberg  Read Replies (3) of 25522
 
RE: "...Fundamentaly, foundry vs captive fabs do not change the investiment/leadtime dynamic."

You say, "I pointed out a very specific mechanism - the high cost of capacity expansion coupled with fluctuating demand and significant time lags between the need for capacity and when that capacity comes on line." The "cost" and "time lags" have been/are accurate, but unit demand has generally been increasing monotonically and unit capacity has been the fluctuating variable that effects price and leads to cycles.

RE: "you seem to feel that because the semi market is no longer PC dominated and is driven by a wide variety of products, that the magnitude of the demand fluctuations (the forcing function to my mechanism) will be abated."

I think the magnitude of the demand curve will get past the the unique boom/bust of the bubble and will return to even stronger growth rates.

We differ on a couple of things, at least. First, the bubble of '98-'00 was not a typical semiconductor cycle. It was characterized by a very unusual spike up in demand unit volume. Second, supply, not demand, was the key to most semiconductor cycles in the past and will be in the future. I believe that the "the foundry/outsourcing model" and the "wide variety of products" don't change your "mechanism" (corrected), but do change the "dynamics", the way the mechanism is dealt with. Both tend to diminish fluctuation (boom/bust) by influencing the supply (capacity) dynamic to be more incremental.
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