Mike, You argue very persuasively that we are in the early stages of an oversupply glut, and that this is unlikely to end until capitulation occurs. I agree. Elsewhere, you argue that diversified firms are in a better position to survive such downturns than more or less single product firms like Micron. So far, no problem.
The question I have for you is: Why would the diversified firms want to keep subsidizing their participation in such an ugly industry ? As you mentioned before, Intel and IBM pulled out of DRAMs, in part, because they had more attractive investments. HP recently pulled out of disk drives for the same reason. I am sure that TI, Samsung and Toshiba have many attractive investments and could readily survive dram capacity reductions. Micron cannot, and consequently, may enjoy the paradoxical strength the relatively weak often enjoy. Unless they can be driven into bankcruptcy, they are less likely to withdraw than others and ,consequently, more likely to enjoy the fruits of the next upswing.
Secondly, you seem to be extremely optimistic about the prospects of new plants in Taiwan and Singapore. These guys are going to need a lot more than equipment to become effective. This is a terrible time for them to start at the beginning of a learning curve their competitors are a long way down. Surely they must be prime candidates for early capitulation ?
Thanks for your thoughtful posts and willingness to address all issues.
Roy |
