GM and All: Must Read on Micron and DRAMs:
"While the DRAM slump already has lasted far longer than he anticipated, Appleton is convinced conditions will improve soon. He notes that spending on DRAM front-end equipment this year is expected to reach only $4.5 billion, one-third the level of recent years. "There's no way that's going to sustain the DRAM industry," he says, especially since most chip-manufacturing equipment is effectively obsolete in three-and-a-half years.
That means most of the equipment installed at the peak of the industry's mid-90s boom will soon need replacing. "You have incredible under-investment occurring right now, because nobody has any money," he says. "And you have an increasing rate of obsolescence occurring in the equipment. Those two factors are going to turn the market."
In anticipation, Micron is gearing up to introduce its products and process technology as quickly as possible to all the newly acquired TI fabs, except the one in Richardson, TX, which will be used for R&D purposes until its capacity is needed. Appleton figures the fabs should be fully qualified and producing Micron-designed DRAMs within 12 to 18 months, by which time he hopes the industry's manufacturing capacity will be back into balance with demand.
That wouldn't surprise Dan Niles, senior analyst with BancAmerica Robertson Stephens in San Francisco. He says TI's decision to sell out to Micron has "sort of made it okay" for other DRAM players to cut back or exit the business, which is precisely what the market needs.
Within weeks after the deal was announced in mid-June, he notes, Siemens AG, Munich, announced it would close a $1-billion U.K. DRAM fab, and Taiwan's Acer Inc., one of TI's former manufacturing partners, said it would stop making DRAMs entirely.
Niles, who sees signs of the market nearing the bottom of its cycle, anticipates more consolidation before the market recovers. He adds, however, that a slow recovery might actually benefit Micron. "That way you would have a lot of the weaker players overseas go out of business," he says. "A lot of these guys are on the ropes and, much like TI, they're ready to give in." "
eb-mag.com
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