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Technology Stocks : Dupont Photomasks (DPMI)
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To: jeffbas who wrote (397)3/20/1998 9:24:00 AM
From: Katherine Derbyshire  Read Replies (1) of 955
 
>>It seems to me that if DPMI can earn a good return on the investment,
they will buy the ETEC machines. If they can't they will buy the minimum
necessary, but will have their existing mask making operations. Thus ETEC
seems to be the company more leveraged on the
profitability of high end mask making.

Do you think this is an accurate view of things and do you have any comments?<<

In any other industry, that view would be precisely correct. The semiconductor industry is weird though, because its entire business model is built on Moore's law-- the number of transistors doubles every 18 months at no additional cost to the consumer. For the chip makers to stay on that curve, they *have* to have advanced masks, whether they make them internally or buy them from DPMI or PLAB. That means *someone* has to buy tools (probably from ETEC) to make the masks with.

Thus, ETEC is a pure play on the continuation of Moore's Law. A bet on DPMI or PLAB is a bet on the company's ability to produce advanced masks in volume at a reasonable profit. While PLAB and DPMI might survive without advanced masks (because they do have revenue from larger feature sizes), future revenue (and therefore earnings) growth depends on their ability to cover the high end. Furthermore, chip makers prefer to buy all masks for a given design from one supplier, meaning the supplier that succeeds on the high end will get more of the low end business as well.

In short, innovate or die.

Katherine
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