Dave, as one of the resident semi-bulls, I will respond (all in good fun of course)
>1. There is over capacity in the Fabs, you may hear of a fab here or there that is
> running 90%. But as a whole the industry is in a state of overcapacity. And my main
> reason for saying that is that, margins on almost all chips are going down faster than
> they should.
With respect of the memory market, there isn't a whole lot of overcapacity... H&Q has suggested many times this year that fab space is the far east has been booked throughout the year, and after the recent fire at the UICC Fab, there was a problem finding fab space to reallocate. There certainly isn't much excess capacity of the most modern fabs capable of producing .25 micron. Ie, yes, the DEC Hudson fab was underutilized, but it certainly wasn't cutting edge.
> 2. The PC industry's growth is nothing to write home about, 16% unit growth is at the
> low end of estimates. And this in a good economy with PC's priced in the $1,000
> range. As you know PC's make up a big part of the chip industry.
well, I think we'll probably see 18%-20% or so averaging over the next five years.... I defy you to find many mature (can we call the PC industry mature?) multi-billion dollar industries with this type of growth rate.
> 3. The "big" conversion to 300mm is not happening till after the year 2000. I think
> investors are expecting it to happen alot sooner. Plus I think there will be a transition
> slowdown while Fabs workout 300mm technology bugs and yield problems. As they
> get closer to moving to 300mm, they will probably cut back 200mmm purchases. As
> has been stated..no one whats to build the last 200mm fab.
Two issues here: the fact that semi-equips staged a decent recovery DESPITE of the fact that there is no spending on 300mm is impressive. As far as the 300mm goes, I think the key point here is that the move to 300mm is a strategic move. That is, once a single producer is at 300mm, no other firm that expects to compete can afford not to be at 300mm. That is, the move to 300mm once it starts will be very fast among the first tier producers.... Also, since 300mm is such a huge cost advantage, there is a pre-emptive strategic motive to be the first 300mm producer... I think that 300mm *might* surpise us with respect to how fast it ramps up.. Again, I don't think we can fully trust what various semi-makers say with respect to their 300mm plans as it would not be sensible for them to reveal their strategic plans to their competitors...
> 6 The semi tool companies may still see things as rosy...but the chip industry that uses
> their tools is not that rosy. Margins are eroding, so either demand is droping or there is
> overcapacity....I think we are seeing both.
whoops... margins are eroding in DRAM since there is oversupply and this is undisputed. I have yet to see one single report which says that demand is dropping.... have you seen computers equipped with less memory lately? your point above says that unit shipments of PCs is increasing 16% and as far as I know, most computers come with more memory then they did 6 months or a year ago.... As far as INTC's pricing goes, take a look at my post on the INTC thread about Q4 1998 vs Q4 1997... in 3 out of the 4 categories I list, pricing now is HIGHER than it was last year at the same time. What we have seen with INTC is viscious price cutting to fend off AMD and due to a product transition from old Pentium classics to the PII and highend MMX. The fact that unit sales hit an all time high last quarter tell me that demand is just fine. AMD and CYRX are losing money, INTC is making billions... this is nothing more than a price war to keep AMD and CYRX at bay.. the last two quarters were bad profit and margin wise (but not unit wise) for INTC since they sold the Pentium Classic line dirt cheap and this is always to be expected at the end of a product transition. But the fact that the channel spot prices were HIGHER than the list price for these pieces (ie, the P200 Classic) tells me that there is neither oversupply, nor a demand problem... Even poor ol' AMD says that they CANNOT meet demand (due to poor yields of course)..... Now that INTC is no longer selling Pentium Classics ASP's will rise.
Just my opinion,
Darin |
