Bob and Ian,
Here's how I view the sector from the top down:
The SIA estimates for DRAM sales are $41 billion for 1995 and $25 billion for 1996, a decrease of 39%. (This is from an October 30 Reuters report.) This drop occurred despite the fact that Windows 95 probably caused DRAM per PC to increase dramatically (double?) in 1996, due to W95 OS requirements. (The W95 cycle started in late 1995.)
In addition, much of the installed base which upgraded to W95/Pentium probably ended up doubling their DRAM as well. (In my case, since the bus architecture of the Pentium was different, I had to toss out my original 16 MB to buy all new 32 MB.) So, despite the W95/Pentium induced boost to DRAM unit volume, total $ sales decreased by 39% from 1995 to 1996.
Now, the price of 16 Mb DRAM just dropped 50% in 4 months! Yes, unit volume is increasing, but are unit volume increases going to overcome price declines to allow total DRAM $ sales to increase in 1998?
As for microprocessors, I read that in February 9% of PCs sold were sub-$1000 PCs. The latest figure for August (or September) was 40%. To me this implies that a larger and larger segment of the MPC market is being commoditized. More customers are choosing to slide down the P200 cost curve, rather than pay for the "latest and greatest" high margin MPC from Intel. So, IMO MPC $ sales will increase at a lower rate going forward. In any case, for the first time in a while there is margin pressure on a major segment of Intel's market (which is why they missed their last 2 quarters).
So, I don't see semi manufacturer revenue increasing as it did in the past.
Last point, re semi equipment manufacturers. According to this analyst's estimates, Korea accounts for 22% of all semi equipment purchases:
Message 2605523
I disagree with the analyst's conclusions. The question that needs to be answered, is who is going to lend money to a business with (1)murky accounting standards (2)a pre-currency and pre-stock market crash debt to equity ratio of 350%-400%, and (3) which produces a commodity product which dropped 40% in value during the last 4 months?
Just my opinions . . .
Best Regards, John. |
