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Technology Stocks : Dupont Photomasks (DPMI)
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To: Duane L. Olson who wrote (184)2/25/1998 12:26:00 AM
From: DJ Clancey  Read Replies (1) of 955
 
Thanks for your response on fixed costs. I see what you are saying about DPMI's fixed costs. However, you can also look at the picture from the chip makers point of view. They also have a high fixed cost of facility/equipment. If you look at the masks as tooling, somewhat equivalent to custom cutting tools for a mill machine in a metal working shop, a different picture emerges. The chip manufacturer also makes margins by keeping his facility fully operational. By switching to the manufacture of specialized chips, of higher complexity, instead of low cost commodity chips, he also will make better margins. In order to make the greater variety of specialized chips, the chip manufacturer needs a greater variety of tooling (masks) to outfit his machines. All in all, a good place to be if you are the tooling manufacturer (DPMI).

DJ
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