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Politics : Formerly About Applied Materials

AMAT 242.41

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To: Katherine Derbyshire who wrote (24437)	9/19/1998 11:27:00 PM
From: Ian@SI	Read Replies (1) of 70976

Katherine, At first blush, I'd agree with your statement re Ultracheap personal computers being a disincentive to build fabs. On second thought, it would appear that other factors might have more of a bearing on whether or not fabs will be built. 1. Productivity improvements 2. Unit growth 3. Current Capacity utilization for the chip type being considered for a new fab. The marketplace is far from saturated. While I don't know how much elasticity will result from lowered Selling prices, I suspect that it is substantial. The glut has caused prices to drop much more rapidly than trend. Is there any reason to believe that this won't lead to above trend growth in UNITs even as $ Sales continue to decline or hold their own.? As long as productivity continues to increase and once the Capacity surplus is consumed, the incentives to build fabs are likely to be as good as they ever were (if they ever were any good). JMHO, Ian.

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