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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (64566)	7/15/1999 6:32:00 PM
From: Earlie	Respond to of 132070

MB: As I've been concentrating on the PC situation of late, I'm not up to speed on the latest (two weeks) happenings in the semi spot markets. I'll check in over the next few days. My guess is that it is just a small bounce (in the three year descending trend). As you are well aware, in most commodities, the cost of production tends to be a powerful floor to price war descents. In the recent semi wars, cost of production hardly slowed the slide. and virtually all of the world's producers are selling well below cost (witness Micron). In that situation, the tiniest anomaly will shove prices back up towards cost of production in a hurry, but so long as massive excess production capacity remains in place, the cost of production now becomes a ceiling. That is the situation today. To be sure, there has been no reduction in capacity, in fact just the opposite. What the boobs don't see is that the increasing capacity is occurring internally and as a result of yield improvement, and not through new bricks and mortar. Incidentally, the recent rise is still a long way below the "high six dollars and change" that I suggested might occur in the 64 Mbit sector before the end of Summer (a comment that resulted in much criticism from the peanut gallery this past Spring). (g) One thing for sure is that prices will have to rise a heck of a bunch more before the misery will end, and that is simply not in the cards until we see the body bags piled up. Some consolidation is commencing (Hyundai - L.G. Semicon, Hitachi - NEC etc), but it isn't going to happen quickly. As you and I both noted many moons ago, when the game of musical chairs gets to the point where only the big gorillas are still playing, the game gets very rough. Best, Earlie