Some musings on industry fundamentals - for a change....
1) We are in the midst of an industry shakeout. Micron will be one of four mass-production DRAM makers left. The only competitors left will be NEC, Samsung and Toshiba. LG/Hyundai have fallen so far behind now that they will be lucky to make the top five. We wait and see, but we have effectively stripped out 20-30% of production output on 64meg equivalent.
2) You can buy all the sub 0.25 micron equipment that you want but to produce with high enough yields at these widths you need the technology. Let's face it, the move to sub 0.25 micron has really opened up a gap between those with shrink expertise (MU, Toshiba) and those without (TXN, Hyundai). Look no further than the fact that Toshiba, NEC and LG are now MAKING MONEY and have been since late last year. If you can't shrink you are out of the game now. Hopefully MU's levenson phase shift technology will be successful to shrink aggressively to 0.18 & 0.15. Anyone with knowledge care to comment?
3) The Koreans have been forced to pull back their ridiculous capacity expansion and are now much more profit oriented. In effect they have forced out TXN, Hitachi, Mitsubishi Electric, Oki Electric and perhaps Siemans and one of their own - Hyundai. They now understand that it is in their best interests to actually make money now.
4) Demand still continues to do well, despite nervous nellies worrying that PC sales might collapse. The introduction of Windows 98 has been a major demand stimulus to the DRAM market - expect the same impact from NT 5.0 (is it now Windows 2000?). Further, you can expect alot more demand outside the PC market from now on - increasing digitalisation of consumer electronics (DVD, DTV, telecoms etc) will see the traditional PC sales-DRAM link become less important.
5) Overall, we are heading into a major demand/supply shortfall into 2000. Perhaps as much as 15%. Remember this is a cyclical industry, and this is going to be one lovely upswing!
PAinvestor - LONG MU! |
