Re MU chip cost
"IMO MU is still in the best position in this speculative DRAM commodity sector with a cost per chip now around the $6 level."
This gets to the crux of the matter. You qualify your statement by acknowledging that it is your opinion. To the best of my knowledge, MU has never claimed that it is the lowest cost DRAM producer, only that others say it is. I've never seen any hard data that details the costs by producer. What we're dealing with is glorified conjecture. This not to say that the claim isn't correct. It's just that without underlying data points, it's not right for us to give it complete credence.
Forget the horse - my kingdom for hard data! - Tad LaFountain
P.S. Is the $6 cost figure a blended average for 16Mb and 64Mb parts? Here's why I ask - the 10Q states s/c revenues of $409.5 million and the MD&A states that 64Mb parts generated 65% of s/c revenues (=$266 million). In the conference call, 64Mb ASPs were said to be about $9.50, so units can be derived of 28.0 million. Taking out a small amount of SRAM and flash from the s/c total leaves $127 million in revenue from 16Mb and less.
Now s/c gross margin was 9%, so s/c CoGS would have been $373 million. If the 64Mb part had a cost of $6, then 64Mb CoGS would have been 28.0*$6=$168 million. Non-64Mb DRAM s/c CoGS would have been $373-168=$205 million, which gives a non-64Mb DRAM s/c gross profit of 143.5-205= -$61.5 million or a gross margin of -$61.5/143.5 (which is an unappealing [and unlikely] -43%).
If I take the $373 million in s/c CoGS and divide it by 85 million total units (28 million 64Mb DRAMs plus 55-60 million units of 16Mb and other, I can get to $4.40 cost per part on a blended basis. Now, that factors in a $2.25 ASP for the 16Mb and below parts, which may be too low; increasing that ASP by 50% to $3.375 takes the total units down to about 65 million for a blended ASP of $5.74. If this is along the lines of how you derived your $6 estimate, what costs do you ascribe to the 64Mb part and what to the 16Mb (because a simple reading of your post might lead to the conclusion that MU has a $6 cost for 64Mb parts that sold for $9.50 in 1QF99, and we wouldn't want people to get the wrong impression). - Tad LaFountain |
