Applied Materials No-Politics Thread (AMAT) Message Board

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Technology Stocks : Applied Materials No-Politics Thread (AMAT)

AMAT 256.41

+1.1%

Dec 19 9:30 AM EST

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To: Cary Salsberg who wrote (9886)	5/20/2004 1:52:45 PM
From: Sam Citron	Read Replies (1) of 25522

The industry has been plagued by over and under capacity which wreaked havoc with ASPs and profitability and created severe cyclical behavior. The prevailing wisdom was that is is the "nature of the beast". The post bubble environment has indicated that things may be able to improve and that the industry can exert rational control over capacity. Are you referring to semi industry or semi-equip industry, or both? The key change that these factors have created is an industry wide adoption of incremental tool purchases and, hence, incremental capacity additions. What are the factors other than projected demand that go into a tool purchase decision model? How important are interest rates? What determines "total cost of ownership"? Equipment is more expensive and fab processes are more difficult to implement. Might these changes not tend to make tool purchase patterns even lumpier than in the past? For example, if I were doing strategic planning for Intel and I knew that a new but very expensive set of tools could bring a dramatic improvement in fab productivity, I might hold off a bit until I was pretty certain that the market could absorb such volume without severe ASP pressure. Yet you speak of "an industry wide adoption of incremental tool purchases and, hence, incremental capacity additions". I can, OTOH, understand how the post-bubble environment and more restricted set of well financed semi-industry competitors makes it easier for them to behave more "rationally". I wonder how such a change might shift bargaining power between semis and their semi-equip suppliers. I would assume that this tends to strengthen the hand of the semis, all other things being equal, unless a similar consolidation has occurred in the semi-equip industry as well. Has it? What long term CAGR in EPS would you assume for AMAT under Scenario 2? Sam

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