Dave, MU believes that it leads the industry in costs, and in the transition to .21µ as well as towards .18µ. They are not going to slow production. In my opinion they will go full bore to .18µ, prices be damned. They have plenty of cash, the competition doesn't. They have the bucks to get to .18µ, the competition may or may not be able to match them. The one with the lowest cost rules, and falling prices hurts the competition worse than it hurts MU. In the last cycle the Japanese folded for the most part, as did TI, and Siemans closed a brand new fab as well. If costs fall again, the high cost producers will fold up first. Look for more fab closings if that happens, but not by MU.
I agree that it was odd that MU's bit output only rose 10% this quarter, but I don't know what TI's bit production was relative to MU, though I do know it was smaller. Also remember that besides shutting down the one Italian line, one of the 4 TI fabs is closed. And remember that MU said that they didn't get the full advantage from the shrink to .21µ until late in the quarter, and that yields are now above 80%. Furthermore MU has indicated that they expect bit production to ramp from here at the rate of 20% increase each quarter. That implies doubling production over the next year, and doesn't sound like holding back production.
Now is not the time for MU to blink. MU has the cash. MU has the technology. And MU has a cost advantage over most or all of the competition that can only be expected to widen in the near future as they move to .18µ. LG and Hyundai have problems of their own related to the merger that will diminish their ability to quickly reduce costs until the merger is in place and the new organizational structure is in place. The Japanese are not spending enough to keep up. Siemans, who knows? Samsung may be able to keep up in the short term, but if so they are probably the only ones. And I'm not telling you anything MU doesn't know, so I believe that MU will keep the pedal to the metal, and if prices fall, so be it.
Carl
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