Zeev,
We are, by all accounts, in a poor year for the semiconductors. Not only that, we're in a seasonally weak period. Even so, earnings estimates for MEMC continue to climb. To be sure, there is some controvery about 1997, but the majority of analysts seem to agree that, even if supply and demand for silicon wafers come into balance late next year, that balance will be short lived.
There is a massive amount of capacity coming on line in the semiconductor industry, particularly in the Far East. The most likely scenario, to me at least, is that silicon wafer supplies will continue to be tight.
In my conversations with the company, Investor Relations indicated that the newer 200mm wafers are becoming the hot product. The July 10 Dataquest study specifically addressed these size wafers and concluded that a shortage would exist through the early 21st century with a possible respite in late '97. According to the company, the study took into account all the projected new construction as well as the cancellations/delays before coming up with its conclusions.
The ability of the industry to put more and more info onto smaller and smaller chips is well documented. As I said before, this has been the rule rather than the exception. But the chip companies are constrained by the laws of physics and it's hard to see a breakthrough so significant that it will drive wafer demand down. A collapse of the industry might do it, but I'm betting that will not happen.
I don't know how much chip demand will grow next year. But I'm suspicious of overly pessimistic prognostications coming at such a poor time for the group. There's going to be a lot of silicon looking for a home next year and prices may suffer for the finished product. But not wafer demand.
Bob M.
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