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Technology Stocks : LSI Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Ram Seetharaman who wrote (19324)	7/18/1999 9:54:00 PM
From: shane forbes	Read Replies (2) \| Respond to of 25814

Ram: Best to be a bit skeptical though. One thing I will state unequivocally - the consensus will be proven wrong. When it comes to investing in semiconductors that has been the case time and time again. Just when and where and by how much remains to be seen. I saw with amusement that someone was talking about a 7 year run in the chip industry because of telecom (communications). Like the nonsense about the end to the cycles in 1995, here they go again... So far no news covers and I hope not to see any for the next few years (but I'll get one and several much sooner I suspect)... Somewhat simplistically, it is easy to see that 7 is wrong because the depreciation schedules are 'faster' so cap exp will be needed and what this means is mass excess capacity. However... the one saving grace this time around may be the Taiwanese foundries who with their greater and greater %ge of total cap exp spending (esp. logic!) can afford to add capacity without screwing the whole industry. By this I mean, in the past, the MANY IDMs would each add their pieces of fabs to the puzzle all at once and then each and every one of them would be short of product to fill the fabs, ASPs would plunge and the crash cylce would begin. Now the FEW TSM and the other foundries are spreading their fixed costs over several companies' product lines (both the fabless companies' and the IDMs who are outsourcing manufacturing more and more) and so this 'smoothing' can lessen the ups and downs in the cyclicity of the industry. How much again we shall have to see. It will as usual look obvious in hindsight but right now it is mud. One caveat to the above reasoning is that there will be foundries popping up all over the place because high ROEs attracts like rats to cheese. This of course brings us back to square one as FEW is now MANY again and puts the above 'one saving grace' thought back into the toilet. 7 years of unbridled prosperity - ha ha! We shall see...