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Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets!
LRCX 154.03-5.6%2:46 PM EST
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To: Ramsey Su who wrote (6715)8/18/1998 11:12:00 AM
From: Michael Sphar  Read Replies (1) of 10921
 
Good questions Ramsey. I like to phrase it this way,

Why should a PC cost more than a TV ?

I didn't quite follow your logic concerning memory pricing, fab shutdowns and demand: "Memory prices, as we all know here, are due to cut backs and total shut down of fabs to artificially reduce demand."

I think you were saying that pricing should stabilize as some supply has been eliminated by some fab shutdowns assuming aggregate demand remains constant or increases. To this I'd say little supply as a total percentage has been eliminated yet and mainly on the obsoleting end of the technology curve.

A quick look at Korean DRAM debt may help crystalize what the Koreans might do short term.

Hyundai is reported to owe $8.4 billion as of Jun 30, which has doubled in dollar terms the past six months due to won/dollar float. This being 930% of company equity.

LG Semicon current debt is $3 billion and 500% of equity as of 6/30.

As of 12/31/97 Samsung had $5 billion in long term loans and $1 billion in short term loans, these being mainly with local banks and government agencies.

With these vast debts to service, the Koreans have little choice but to cut spending for future growth and ship like crazy to grab every available memory dollar in addition to relying on labyrinthine economic support structures of the chaebols. Memory supply in the foreseeable future will remain abundant and cheap.
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