Katherine: MASK at .25, etc.
1. The tenor of your posts suggests that .25 is where we draw the line between MASK and PLAB or DPMI. The following statement is from the MASK FY98 10K, issued earlier this year:
"In May 1998, the Company announced its intention to expand its laser beam imaging capabilities by ordering two ETEC Alta 3500 systems, which now give the Company advanced lithography capability. The Company believes that the systems will allow the Company to meet the challenging requirements for placement, critical dimension, butting and alignment control imposed by .25 micron photomask production. The Company intends to install the two ETEC Alta 3500 systems in its facilities in Europe and the United States in Summer 1998 and early 1999, respectively."
Let's end the discussion on MASK not being at .25 at this point.
2. I said that is is hard to conceive of a rebound in Asia that is not part of a generalized industry rebound. You said:
"I'd actually put it a different way: It's hard to conceive of a general industry rebound without a rebound in Asia."
With all due respect to your technology expertise, you have the economics backwards. Asia went down because of financial mistakes, e.g., overleverage, not technology mistakes, e.g., obsolete production capacity. A worldwide rebound that pushes up demand and firms up pricing may allow them to take part, i.e., recover from their financial mistakes. On the other hand, a worldwide rebound may take place after so much financial damage has been done and technological obsolesence has taken place that Asia lags for a considerable period of time. This is absolutely the case for Japanese banks -- formerly the largest and most aggressive in the world -- and could certainly be the case for Asian chip production. In short, Asia needs a worldwide rebound to bail it out, not the other way around.
The difference is more than semantic. In one case, any rebound benefits MASK and could benefit PLAB and DPMI. In the other case, any rebound benefits PLAB and DPMI and could benefit MASK. From an economic and financial perspective, the first conclusion is correct. The second conclusion is backwards.
3. With respect to my comments about slowing the transition to .25 or below, I read the links you posted. They make it clear that the leading edge is at .25 or going to .25 or below. I have never disputed this. Indeed, MASK's acquisition of equipment to produce at .25 is confirmation of this. What I have said is this: 1) While the leading edge is at .25 or about to be at .25, I don't believe the bulk of production is at that level, and 2) when overall demand is down, ASPs are down, cash flow is down, equity values are down, etc., you focus on capacity utilization, debt service coverage, overall production efficiency, etc., not capacity expansion. Sure, a new fab with 300mm wafers costs billions and a .25 shrink with new steppers costs millions but I haven't seen the stepper and mask manufacturers announcing how great business has been because it only costs millions go to .25 instead of billions to go to 300mm.
Finally, a more general comment. While I respect your technology background and certainly defer to the semi engineers on this point, the biggest problem in this industry is that too many BUSINESS DECISIONS have been made by people with expertise in technology and too few with expertise in economics and finance. Over the long-run, if you're operating with 9:1 leverage (typical of Korea) or subsidized equity (typical of Japan) or commodity production pretending to be specialty production (typical of Taiwan) you're asking to have your head handed to you in BUSINESS sense.
I'm not saying DPMI or PLAB made any of those mistakes. I'm saying that if the ultimate objective here is the INVESTOR part of Silicon Investor rather than the SILICON part, we need to spend more time on the Income Statement, the Cash Flow Statement, and the Balance Sheet than on how deep into the submicron range we can get with the latest deep ultraviolet laser.
If you can provide insights into how the companies you follow are translating the silicon part into the investor part, I'd be more than happy to comment in the areas of my expertise, i.e., income statement, cash flow statement, balance sheet. In the meantime, I look forward to reading your detailed posts.
LittleMax |
