LL, but wasn't it MU management on the call last quarter disclaiming any effect on supply? <g>
IMHO, these guys aren't finesse players; they place by brute force.
But a finesse player might try to do that. If they're trying the finesse move, it's possible.
I think what messed up a lot of the Dan Niles types was the theory that prices went down at the end of Feb. due to MU clearing out inventory and then the Japanese ending their FY in MArch. So according to this theory (which quite conveniently amounted to in effect "pay no attention to the fact that it looks like we're on another down leg") there should have been a rebound once that was over.
The rebound didn't happen.
I my mind that raises questions about the "industry restructuring". The people who watch this industry have to be wondering when that's going to kick in or putting out theories on when exactly lower CAPX trends and exits by marginal players are going to have that effect.
Long-term - no question the industry in terms of bricks and mortar is better off now than 1 year ago, 2 years ago.
But is their something in the nature of the competition in the interim period before the upside of the structural changes really takes effect (or takes effect to a much, much greater degree than it has at present) that is exacerbating things? Are these companies so focused on cost reduction (and yeah, absolutely, this is obviously the thing you want to be focused on with this type of product - so it makes sense on a firm level) that there's something bordering on dysfunctional when you blow it out to the industry level?
Let's say DRAMtron's total unit cost for a 64MB was 6.10 last Q.
How much of that 6.10 was variable costs v. fixed costs?
DRAMtron is hell bent on cost reductions.
How much of those cost reductions are due to reductions in variable costs (i.e. major tweaks like shrinks + minor tweaks) and how much is due to the fact that you're just spreading out fixed costs per unit?
So in producing more, you're lowering costs (which on the firm level is a good thing), but on the industry level may turn out to exacerbate any supply/demand imbalance.
In theory, you stop producing when the marginal cost curve and marginal revenue curves intersect. But is the industry so wacky that everyone has just chucked MICRO 101 or at the firm level there's such an intense pressure to increase margins by reducing costs that added up on the industry level equals periods of intense dysfunction?
On the firm level - more is better.
On the industry level - more is sometimes better, but when it isn't, the cummulative effect can wrek havoc on pricing.
And if someone can draw up all the charts and graphs that make whatever sense there is to be made out of the above - I'd appreciate it <g>
Good trading,
Tom |
