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To: Drake who wrote (2721)	9/21/1999 11:05:00 PM
From: Immi	Respond to of 3818

from cs first boston The last significant earthquake to hit a major semiconductor area was on January 17, 1995, in Kobe, Japan. Like Taiwan, the Kobe earthquake was severe, but most of the fab structures were left intact. Like then, our biggest concern with Taiwan is the damage that supporting infrastructure industries, such as electricity, chemicals, and transportation may have sustained. As of late last night, the main electricity grid for the Hsinchu Science-Based Industrial Park was still down, meaning that the fabs located there were working on auxiliary power. Officials at UMC expect power to be back up on Tuesday. We estimate that roughly 20-25% of wafers in process (WIP) could be at risk, translating into approximately two weeks worth of inventory. Based on our experience with other fabs that have had shutdowns, if there was a major power loss, it is only those wafers that were actually in active process that are likely to be scrapped. Over the past 20 months, the Taiwanese industrial park has been hit by two other power outages, so we believe that solid back-ups are in place. During the last outage in July, emergency power helped minimize the impact, as UMC claimed less than 2% of its WIP had to be flushed. However, without a firm time for power restoration, the passage of time could affect other idle wafers, too. Lower exposure to Taiwan could offer a good investment opportunities We think that the uncertainty surrounding the extent of the Taiwan earthquake could negatively affect most semiconductor stocks. However, we believe that investors may find a good investment opportunity should stocks of companies with relatively low exposure to the Taiwanese foundry business negatively over -react. Contrary to what some investors may think initially, most of the franchise players in our Communications IC universe have little or no foundry work being done in Taiwan. Since many of these companies deal in bipolar, BiCMOS, gallium arsenide, or silicon germanium processes, they either manufacture their wafers internally or at domestic foundries, notably IBM. Within this universe, we believe that investors can break down the opportunities according to exposure: Very little / No exposure: AMCC, CNXT, DS, INTC, RFMD, TXN, VTSS. Fair amount of exposure: PMCS, BRCM Large exposure: CUBE, GALT

To: Drake who wrote (2721)	9/22/1999 1:14:00 PM
From: Beltropolis Boy	Read Replies (1) \| Respond to of 3818

for what it's worth, re: taiwan. ----- SUMMARY -- Analysts' views on Taiwan earthquake September 22, 1999 05:08 AM SINGAPORE, Sept 22 (Reuters) - The following are research comments from key investment houses following the earthquake that devastated Taiwan. The island's worst earthquake on record killed more than 1,700 people and buried 2,800 under mountains of rubble on Tuesday. * CREDIT SUISSE FIRST BOSTON: If damage is mainly confined to Nantou and Taichung, impact to the Taiwanese economy would be limited. But if Kaohsiung and Hsinchu, located about 70 miles from Nantou, are affected by more than a temporary disruption, the damage could be significantly larger. Assuming no damage to steel and electronics factories in Kaohsiung and Hsinchu, CSFB estimates a five percent loss in industrial production and US$1 billion loss from exports for September. The CPI could surge above five percent in the month, with the construction industry seen benefiting. Loss in GDP for 1999 could amount to 0.2 percent to 0.4 percent. * FRASER-AMMB RESEARCH: Taiwan supplies 12 percent of world semiconductor demand. Overall, estimate the quake will lead to production delays of up to three weeks "that in turn translates into estimated profit cuts amounting to more than 10 percent." Hotung Investment Holdings, the largest high-technology venture capital company in Taiwan, is expected to see some delay in its divestment schedule, "thus impacting 1999 bottomline." But 2000 earnings will be largely unaffected as companies will resume normal production by then. Singapore Airlines revenue to be marginally affected. No impact seen on Want Want Holdings Ltd , which has a rice cracker factory at I-Lan and food concern Cerebos Pacific Ltd, with a factory located in central Taiwan. Singapore Telecommunications Ltd's ISP network under Singnet was affected by the quake which damaged an offshore undersea cable linking access to websites in North America. But the traffic was diverted to other cables and access restored on Tuesday. * MORGAN STANLEY DEAN WITTER: American International Group is a major life insurer in Taiwan, and its Nanshan Life is the third largest in the country. Company has catastrophe reinsurance in life business which would "mitigate the losses." AIG is not a major property-casualty insurer in Taiwan. Life insurance in Taiwan had premiums of $12.5 billion in 1997, while property-casualty had $4.8 billion of premiums. * MERRILL LYNCH: Assuming no more significant structural damage has occurred, estimate that one half and one week of production at semiconductor makers will either be lost or scrapped. Sudden loss of power would require fab managers to recalibrate and safety-check their lines before restarting production. This could take up to a week. Estimate Taiwan should amount to 10 percent of finished product global semiconductor production in value terms during 1999. Taiwan DRAM production is between five and 10 percent of global total. On insurance, total insurance premiums in Taiwan for life and nonlife in 1997 were $17.3 billion (Turkey's total market was $1.8 billion in 1997). Estimate that nonlife insurance represents about 30 percent of total Taiwan market. On synthetic fibres, companies have been hit hard as most of the plants are near Taipei. Realigning machines is expected to take a month. Given that Taiwan is one of the biggest synthetic fibre manufacturers in the world, this will likely cause material shortage in global supply and push up prices. * DAIWA: Most Taiwanese semiconductor lines will be shut for a few days until the main power supply is restored. Although there seemed to be no structural damage to the wafer fabs in the Hsinchu Park area, employees are currently prohibited from entering the fabs due to the threat of potential gas leaks. Many chip makers cannot confirm damage as they need to conduct full tests on equipment once the main power is restored. According to Hyundai, contract prices on DRAMs may go up further next month from the current US$8 level due to the power outage. * CIBC: Uncertainty of supply disruption could result in near-term volatility in shares of fabless semiconductor stocks that use Taiwan Semiconductor Manufacturing Corp or UMC Group as their foundry choice. Together these two leading foundries provided 48 percent of worldwide fabless wafer supply in 1998. The fabless companies include Altera, DSP Group, Xilinx, PMC-Sierra, Zoran and Genesis Microchip. Additionally, MPU suppliers AMD and Intel could also be affected because, although each produces its own devices, approximately one third of the world's motherboards are assembled in Taiwan. * SG ASIA CREDIT: Thailand's KCE Electronics Plc and Hana Micro Electronics Plc rated "buy" on expectations they will benefit from the quake. KCE, a maker of printed circuit boards, could benefit from new orders and higher PCB prices. Hana, an integrated-circuit packager, could see new orders at its Hong Kong Technology BGA packaging factory as some chip makers shift orders away from Taiwanese firms. Sees target price of 97 baht for KCE against current price of 76 baht, and projects Hana price of 147 baht against current 138 baht price.