Mosaid caught in 'bust cycle'
Kanata-based company expects to weather
semiconductor industry collapse
By STUART McCARTHY, Business Editor, Ottawa Sun
MOSAID Technologies executives say the company has strong
enough legs to stay standing until the semiconductor industry
recovers from an unprecedented collapse.
Kanata-based Mosaid, which designs memory components and
testing equipment for most of the world's leading semiconductor
manufacturers, expects to lose about $3 million excluding
writedowns on about $22 million in revenues for the current fiscal
year.
The recent first-quarter loss posted Aug. 27 of $5.4 million
including a $4.5 million restructuring charge, was the first in 24
consecutive quarters.
Mosaid chairman Dick Foss told shareholders at the annual
meeting yesterday the company is caught in a "huge bust" cycle.
"In the U.K. every one of the branch plant fabs is closed,
abandoned, abolished, whatever," said Foss. "The Newcastle
plant of Siemens was ... only opened within the past 12 months, a
$2-billion investment by Siemens and they shut the doors and
walked away."
Foss said industry analyst Dataquest described that debacle as
"the biggest capital disaster in the semiconductor industry's
history.
"I can't remember when there was such carnage of existing
fabrication facilities at the leading edge.
"Walking away from brand new existing fabs is something new in
everybody's experience."
Foss said today's bust was created three years ago when the
basic 4 megabyte Dynamic Random Access Memory (DRAM)
chip was selling for $13.50 (a megabyte) yet cost only $1 to
produce.
Foss said that was "a licence to print money" and everyone
jumped in and flooded the market. Today, DRAM retails for
below cost.
"I've got to conclude that with all these fabs closing, the
pendulum's going to the other endstop sometime," Foss said.
"I think we can look forward to a humongous boom sometime
around the year 2000."
But, said Mosaid president and CEO George Cwynar, "In the
short term we face one of our biggest challenges in the last six
years."
Industry analysts Dataquest recently downgraded their shipping
forecast of DRAM from flat for 1998 over 1997, to 23% less
than 1997.
However, he remains "bullish" on long-term prospects and says
Mosaid is to diversify itself to head off further crisis.
Investments have resulted in new leading-edge chip designs to
shops around to prospective customers as well as new testing
equipment.
Cwynar said Mosaid stands to benefit shortly from its total
$6.2-million investment in Ottawa-based Accelerix, a fabless
semiconductor company, which has created a unique "system on
a chip."
About 50 shareholders were on hand yesterday as a shareholder
rights plan and employee stock option plan were approved.
Mosaid also added recently retired Mitel CEO John Millard to its
board.
Mosaid shares closed down 20cents to $3.80 on the TSE
yesterday.
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