<Perhaps this question should be posted on the Asian forum thread, but some of the same people are on both, so I'll ask it here: How can we be getting the news we are reading about the Asian liquidity crisis and yet simultaneously getting a large expansion in a sector which is already overbuilt? And how can the same companies which were prime culprits in overbuilding the DRAM sector be prime builders in this overbuilt, under-margined (if that is a word) sector? Who is lending them money for this expansion? Are their labor/production costs so much lower than SEG, QNTM and WDC that they can actually be making money when ASPs are deteriorating as rapidly as they have been over the past 6-9 months? Isn't there something wrong with this picture?>
Perhaps another interesting question which ties into this would be how much does it really cost to put in new capacity, and how long does it take to get on line? I'm thinking about drive assembly, not heads or media.
There was an interesting figure given by Mr Geenan. 80+/-% a HDD cost is materials. So, how much is the cost of plant and equipment, and labor?
With a semiconductor fab, it seems like a much greater task to get a fab up and running well. Still, the lead time from ground breaking to production is nearing one year while this time might have been 2 to 3 years not that long ago. This is still a very capital intensive project, and the risks of going to a greenfield site are high.
So, how does that compare to making a HDD?
Perhaps the task of geting a new plant going for Fujitsu is not that high. They certainly have been firing on all cylinders. Geenan clearly said Fujitsu had made all the right moves and was looking like it would be a top 3 player in the future. Based on track record, you might ask why anyone would invest in Seagate, not Maxtor or Fujitsu.
Regards,
Mark |
