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Technology Stocks : Chartered Semiconductor of Singapore (CHRT) -- Ignore unavailable to you. Want to Upgrade?

To: John Liu who wrote (6)	4/20/2000 10:31:00 PM
From: Marty R	Read Replies (1) \| Respond to of 12

Well I don't know the answer to your question. But, I'll try to find out. I'll tell you what I would assume. 1) They don't have to spend a great percentage on things such as R&D. The products they're going to fabricate would most likely be spec'd out and they just provide the facility to put it together. Not a small task, in and of itself. But, none the less a certain cost savings that can be recognized. 2) I would also assume that what they'd lack in margin would be made up in volume. How much do you think McDonald's make on a burger? Probably not much. But, if they can sell billions then it adds up. They must be expecting volume to pick up or they wouldn't be putting billion $'s into building a new fab facility. Finally, from what I understand they'll be making a lot of the chips for hand held mobile devices. How much growth do you think there will be in mobile phones, audio players, PDA's and untold other hand held devices not yet designed yet? These are just presumptions off the top of my head. I don't have hard numbers but as time permits I'll see if I can't find some out. You'll have to do your own DD before investing. I threw a few dollars into it while the market was down and we'll have to see what shakes out.

To: John Liu who wrote (6)	7/3/2000 2:13:45 PM
From: Stu Bishop	Respond to of 12

Hi John, Sorry to respond so belatedly to your concern about margins being sqeezed by the big electronics companies. I have some thoughts I'd like to share. Chartered is not too different from the electronics manufacturing services companies like Flextronics, Jabil Circuit, and Solectron. Chartered and the other foundries make the chips, and the EMS make the products that use the chips. Either way, it's manufacturing that is being outsourced, that was once done in house. I recently read a press release that stated the big electronics firms now outsource 15% of manufacturing, and want to eventually outsource 72%. They are transitioning the manufacturing to the contract firms as fast as they can take it. As long as the demand for these services exceeds the supply, the contract firms will have pricing power. Eventually, the contractors will have ramped up capacity to meet the demand, and at that time I too would be concerned about pressure on profit margins. I would guess that in the automotive industry analogy you mentioned, the availability of contract, or more likely vendor, manufacturing services is not in short supply. When supply is excessive, such as with the disk drive industry, prices fall through the floor. I would expect the foundries and EMS firms will have pricing power for at least the next five years. After that, who knows. SPB