Semi-Equips - Buy when BLOOD is running in the streets! Message Board

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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!

LRCX 148.32

-3.3%

Nov 14 9:30 AM EST

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To: Clarksterh who wrote (5702)	6/6/1998 1:37:00 AM
From: shane forbes	Read Replies (2) of 10921

(DRAM driver for now, better cash flow helps DRAM companies) Clark: RE: In order for DRAM companies to order lots of new equipment from AMAT they need not only to have a recovery in prices, but also a shortage of capacity. First you need money to order the new equip. These companie have been bleeding money for quite some time now. So if they can reduce output by say 10%, because of the current demand for memory, they may get say 30% increases in prices. This means better cash flow. They can then use some of this cash to upgrade some facilities that badly need upgrading. Longer term without a doubt the capacity needs to come down and demand must continue to be strong... Re: I don't necessarily think that the AMAT recovery is predicated on a memory price stabilization. Although several years ago they were more than 50% of the semi-equ market, they are now down to 25% (ref: last Lam and Mattson conference calls). Part of the reason why it is 25% is because they overbuilt last year and they do not need the capacity right now and can't afford it anyway even if they needed it! Interestingly DRAM is down to something like 10-15% of total chip output these days - about 17b. out of around 140b. total (roughly). So even at 25%, DRAM is quite an expensive little baby as far as equipment is concerned. I think the essence of it is that DRAM uses leading edge equip and with the exponential price curves of equipment, a relatively small reduction in DRAM equip ordering has a disproportionate effect on semi-equip revenues. Besides the semi-equips like AMAT attribute their problems at least partly to DRAM pricing. But as I've said before over time Logic will be the leading edge driver - I think the SIA forecast shows Logic overtaking DRAM re: line widths over the coming years - then though DRAM will be important it no longer will be crucial... shane.

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