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Politics : Formerly About Applied Materials
AMAT 261.81+0.4%3:59 PM EST
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To: Lester e. who wrote (13471)12/16/1997 7:06:00 PM
From: Exciton  Read Replies (1) of 70976
 
To All: A Theory: Profitable 0.5 micron DRAM is over forever. DRAM producers have a decision to make. Move to 0.3 or 0.25 technology or exit the business. Staying pat and hoping 0.5 micron prices will recover guarantees failure and is as good as exiting the business. Most if not all of the DRAM producers have eeked out every possible manufacturing efficiency with the current process--yields are maxed out. There is near complete parity in understanding of 0.5 micron DRAM production processes, and so no producer has any sustainable technical/cost advantage over the others. Simply cutting back production and hoping others will do the same so that prices recover substantially will not work. The production processes are so well understood and the capacity so easily brought online that any transient undersupply will vanish almost immediately.

This is how the current situation is different than the DRAM glut in 1996. Then, there were still marginal improvements to be made in processes and yields relative to competitors and there was some price recovery--ie no need to order new equipment. Now the 0.5 micron cycle is at an end, period. Some will probably decide to exit the DRAM market. Most, IMO will move to 0.3 and 0.25 processes and produce 64Mbit DRAMS and higher while also trying to diversify their product lines beyond memory. Yes, there may be a short term slowing of demand for equipment from AMAT as the producers make their decisions, but when they make the committment to move forward, where else are they going to turn? Long AMAT.
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