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Politics : Formerly About Applied Materials
AMAT 268.59-0.4%12:29 PM EST
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To: Clarksterh who wrote (22047)7/22/1998 9:44:00 AM
From: Katherine Derbyshire  Read Replies (2) of 70976
 
An overcapacity state exists at present, because capacity grew faster than demand. Demand remains somewhat anemic. If fabs shrink, they will create additional capacity. Since demand is growing fairly slowly, and since substantial excess capacity already exists, shrinks risk adding capacity more rapidly than the market can absorb it.

Part of the current problem is that companies, and countries, have gotten into the semiconductor business for prestige reasons, and have been willing to sustain large losses and/or large debt/equity ratios in the interests of market share growth. This sort of thing led to the construction boom of 1995, and thence to the capacity glut we are now experiencing. Aggressive shrinks are, IMO, more of the same.

Katherine
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