Harry - Re: "Section Charles Clough of ML stated that Intel announced a 40% cut in capital spending in the last couple of weeks. "
The only thing I recall is several comments by Intel indicating they intend to REUSE 70% of existing process equipment in existing fabs as they transition to the next smaller process.
Andy Bryant, who made these comments, was EMPHASIZING Intel's new focus on COST REDUCTIONS - NOT Expansion reduction.
If Clough is anything like his buddy Kurlak, my guess is that these guys are way too far removed from the Semiconductor industry to UNDERSTAND or APPRECIATE details and subtleties.
A great example of this was Bozo Kurlak's comment 6 or 8 months ago about a CPU GLUT that was imminent in 1998 due to AMD and Intel converting rapidly from 0.35 micron to 0.25 micron processes.
Bozo Kurlak made the asinine and immature statement that output would IMMEDIATELY double.
BOZO KURLAK never considered the fact that AMD and Intel and every other CPU maker is ADDING functionality and transistors to CPUs - 3D NOW (AMD) and 128K L2 cache (Intel/Mendocino), Sharpy for AMD - that will tend to INCREASE die sizes to offset the smaller geometries.
Those guys in the Tall New York City Skyscrapers can't see beyond the Hudson River let alone to California to see what is REALLY going on !
Intel has declared they are SOLD OUT and Bozo Kurlak predicted a GLUT of CPUs.
Remember Bozo Kurlak's comments - a CPU GLUT in 1998 !
Paul
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pathfinder.com
Weekend, May 16-17, 1998
Once again, Tom Kurlak's comments
slam chip sector
The problem: "The majority of the market over the
next five or ten years is likely to want simple
computers to do simple tasks."
By Michael Brush
moneydaily.com
The sub-$1000 personal computer may be great for
consumers. But it has been rough on the companies
making components - like chips -- that go into it. Add to
the cheap PC's popularity a glut of microprocessors
created by increased capacity and slower sales, and it will
be hard for chip makers to see much of a gain in sales or
profits this year. Their equipment suppliers will suffer, too.
That's according to Tom Kurlak, Merrill Lynch's influential
chip sector analyst, who shared his view in a conference
call with investors Friday.
News of Kurlak's comments helped push Intel (NASDAQ:
INTC) stock down over $4 to close at about $80 Friday in
heavy trading. Shares of Advanced Micro Devices (NYSE:
AMD) and National Semiconductor (NYSE: NSM) also
traded about 10% lower on heavy volume.
Kurlak says the glut will be caused in part by a ramp up in
production this year at the major chip makers: Intel;
Advanced Micro Devices and International Business
Machines (NYSE: IBM), which make the K-6 chip; and
National Semiconductor and its Cyrix subdivision. This
build-out will increase overall capacity by over 50% to 150
million units by the end of this year. But PC makers will
only need about 115 million , according to Merrill Lynch
estimates.
That's not the only thing that will hurt the chip makers.
They are also getting less money for each chip they sell,
on average, because the growing market for cheap PCs is
forcing them to reduce prices. "The mix continues to shift
towards low-end product, and this drives the average
selling prices down for the microprocessor producers,"
Kurlak said on the call. "So it is not a good trend."
Another problem for the chip makers is a slowdown in
demand for their product. Semiconductor sales in March
dipped below sales the month before by about 1%, and
were 5% below the same month the year before, says
Kurlak. Only eight months ago, the industry was enjoying
20% year-over-year growth.
"We think it is pretty unlikely there will be any growth in
1998. And the debate now is whether it will be negative by
5% or 10%," says Kurlak. "With the complications created
by a glut developing in the microprocessor market, and a
continuing glut in the DRAM market, there is not much
chance of improvement in overall industry sales and profits
in the second half or early 1999. It's possible sales and
profits will be lower in the second half than in the first half."
To keep profits growing, chip makers will have to find new
markets where they can sell higher-priced processors in
large volume.
Kurlak says he doesn't see any relief from leveling off in
the popularity of cheap PCs among consumers. The
market share of low-end PCs has gone from zero to 27%
in 12 months, and it could soon reach as high as 50%, he
says. "It's not likely to stop here, with this much
momentum."
Why not? Because from here on out, Internet use will drive
sales of new PCs, as opposed to new software apps that
need more computing power -- the trend that has driven
sales of new PCs in the past.
"The Internet is increasingly being used as a
communications tool, and the appliance required to get on
the Net is relatively simple," says Kurlak. "We don't
believe the bulk of the market is going to continue to
become more complicated and propeller head-like. The
majority of the market over the next five or ten years is
likely to want simple computers to do simple tasks."
Send your commments to Michael Brush |
