Carl, most of your observations are correct, but I think you have missed three points.
The first is the capacity situation in the wafer producers segment. The overcapacity there has been the main reason for the losses and stock low price (as expected). Last year I expected this over capacity to be absorbed by the next quarter. I was probably underestimating the weakness of the Asian market in this regard. In any event, I know of no new capacity coming on line, and thus a balance and better pricing should return.
The second point, is that while the total end sale of semi might increase in most years (may not this year), the number of chips does not always increase (for instance, a 64 mbit memory chip replaces four 16 mbit). Furthermore, the constant reduction in feature size causes a decrease in Si real estate used per function delivered. In most cases, however the growth of "functions" shipped overtake the decrease in "realestate per function" resulting in net growth of Si wafer shipped.
The last point is margins. When they ship standard 200 mm wafers, they are in heavy competition with other standards suppliers. The big profit margins are made on premium products such as epitaxiated wafers and , hopefully also, the 300 mm wafers.
When you add these three elements into the equation, you might even get into "time zones" were there is shortage of wafers overall, or at least at some "sweet spots" in their offering. That is when with their new capacity in Asia, the earning could easily explode to the $4/share range I have been forecasting visibility thereof by the middle of 2000.
Zeev |
