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Politics : Formerly About Applied Materials
AMAT 242.41+5.0%3:59 PM EST
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To: Ian@SI who wrote (20030)6/9/1998 12:55:00 PM
From: Big Bucks  Read Replies (3) of 70976
 
Ian,
I think Rick is right on the money, overcapacity is a reality and
any additional productivity improvements just makes the situation
worse. IMO, this is no-win situation. Why spend hundreds of millions
on new fabs/equipment if your chip profits are minimal and there may
be a possibility that after you have spent the money to upgrade your
fab(s) a newer technology paradigm is available which makes your
recent purchases outdated? For example, a fab purchases equipment to
take it to 0.25uM design rules and in 1 year the leading edge design
rules are approaching 0.15uM which your newly purchased equipment
isn't capable of doing. The fab then has to recoup the investment and
depreciate the equipment with chips that have decreasing margin
potential over the next X years just to break even on the investment.
Where is the profit potential unless the fab has a niche product that
isn't yet a commodity. It seems that all the high productivity/yield
enhancements that are enabled by the wonderful equipment that AMAT and
other vendors manufacture has made high use chips into commodity
items with decreasing profit/margin potential. I have argued this
point as have Dave Dhillon, Akidron, Teri, and others since summer
of last year. There is manufacturing over capacity in the chip market
and fabs are forced to compete with decreasing revenues and a decreasing market share or go out of business. This is a viscious
cycle with no clear winner, IMO.

Just my opinion,
BB
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