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To: Madharry who wrote (7561)	5/17/2000 1:18:00 PM
From: Czechsinthemail	Read Replies (1) \| Respond to of 9582

Robertson Stephens' Dan Niles responding to a question about semiconductor cycles: The demand for semiconductors has experienced huge upswings and downswings over the last few years. Do you see this stabilizing in the future? What factors will contribute to decreasing the volatility? Daniel T. Niles: The semiconductor market has seen significant upswings and downswings over the years. However, we do not believe there have been huge demand swings as your question suggests. We have seen a broadening of the electronics end markets for semiconductors, and from time to time, we have see periods where product transitions have stalled demand for short periods; however, we believe demand for semiconductors has been growing very nicely over the years. The cycles of the semiconductor business result from the capital intensity of chip manufacturing. A new fab costs an estimated $2-3 billion and requires a couple years to construct. In our opinion, cycles generally occur in this business because of the lag times related to recognizing that new capacity is needed to satisfy demand and the time it takes to put that capacity in place. When capacity does come online it tends to come on all at once from the multiple manufacturers. A tight capacity situation can change suddenly to one of oversupply if the industry overbuilds capacity. Remember that each company is building independently and trying to gain share from competitors, so there is no coordination of the capacity build. Ultimately, pricing can deteriorate rapidly when capacity outstrips demand. On the other hand, at times when demand outstrips supply the business can be extremely good. Our view is that the industry is currently in the early stages of a multiyear upcycle. We estimate that in this kind of environment prices can increase, revenues can grow very strongly, and profitability can increase rapidly for semiconductor companies. We expect to see another downcycle -- the question is when it will occur. We have heard a number of theories over the years about why the semiconductor business should stop being cyclical. Nevertheless, cycles have continued. Certain types of companies (fabs/fabless, commodity/non-commodity) may be more or less affected by the cycle, but we believe that we will continue to see cycles in the semiconductor business. In our opinion, the cycle creates opportunities for profits by investing in semiconductor companies if you buy them near the bottom of the cycle. We believe the challenge remains to identify the inflection points in real-time. multexinvestor.com