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Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: Skeeter Bug who wrote (48198)	9/12/1999 9:59:00 PM
From: Chas	Read Replies (1) \| Respond to of 53903

Skeeter, there are many reports out there that have cited Microns low cost vs other suppliers. I realize no matter who I reference here on this post, you will cut it down, so I will do one, so to show someone does think MU has a low cost, maybe the lowest cost at the moment, appears to be to me and thats what I said but it was not based on this article alone. Just because this may or may not be true does not mean the stock will go up. Montgomery 8-26 Semiconductor Industry report, excerpt under DRAM: "Over the past week, DRAMs have gone into shortage. OEMs are daily scrambling for upsides that are no longer available from their volume suppliers and are having to move into the broker market for parts. This is a move of last resort since broker prices are 20%-30% higher than volume contract prices and also for the signal it most clearly sends the DRAM manufacturer that THE POWER has inextricably shifted from buyer to seller. The last time this shift in the DRAM supply-demand balance occurred was early 1993 and was followed by two years of contract price increases. Prior to this, prices in upcycles might run flat for a period of time, then decline moderately for awhile. The capacity shortages created by subpar capital spending in 1990-1992, however, were exacerbated by exploding demand brought on by client-server computing. Parallels to the present packet switching, internet protocol based computing revolution are strong. Furthermore, capital spending in memory has been sharply reduced from prior peak cyclical highs. Evidence abounds that Japanese and Korean spending will remain below prior trend for some time to come, that existing DRAM capacity is being diverted and that Micron has jumped out so far in technology leadership that still further downsizing is likely. This process doesn't entail actual declines in spending by Asia Inc, but rather failure to increase expenditures to keep pace with rising demand and new process generations. The hollowing of Japans DRAM industry that began in 1990 could extend to Korea this cycle. The first casualty appears to be Hyundai, which is reportedly still struggling to integrate its LG acquisition. Taiwanese foundries are more than tied up with much higher margins other business and won't soon have spare capacity to divert to DRAMs. If this analysis is correct, then supply creation will probably lag demand growth for the next year, meaning that the shortage that has just manifested will deepen, a lot. Pricing which has jumped of late in excess of $8 in the broker (spot) market provides impetus for contract prices well above $6 this fall. At $6, the only fully profitable producer is Micron. At $7, add Samsung. At $8, add Hyundai but not LG. At $9, add Siemens, Toshiba and NEC but not Hitachi, Mitsubishi or Fujitsu. Get the picture? The conclusion is simple: if pricing keeps going higher, Micron will earn substantially above present Street numbers but others will try to get back in and Micron's share will be capped. Pricing will depend upon how strong demand is or how willing the capital markets are to fund loss-leader enterprise. The 1997 Asian financial debacle is not encouraging for the latter behavior over the long haul but doesn't preclude it in the near term. On the other hand, if pricing flattens out, the only long-term financial winner is Micron, with Samsung strong enough to also hold ground. Others will be unable to make material headway, which as the Japanese have found out in recent years means death in the ferociously competitive DRAM industry. In this instance Micron's share will approximate 40%-50% reflecting its steadily improving cost advantage as well as design and process innovation. This is the strategic investment case for the stock, not the earnings estimate du jour."