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Technology Stocks : Semiconductor and Semi-Equipment Analysts - Their Calls -- Ignore unavailable to you. Want to Upgrade?

To: hhieslmair who wrote (68)	7/29/2000 9:21:57 AM
From: Lone Star	Read Replies (1) \| Respond to of 195

Many cogent points, most of which I'm in at least some degree of agreement, but never say never. Another reason not stated is that shrinks do not give the "shrinker" the same level of chip output increase as in the past ( this is THE key driver forcing the move to 300mm). Also, we are not seeing the willy-nilly fab rush as last time around, where companies, and more importantly countries( especially Korea) built fabs at an insane pace for a market share grab. The boys got burnt bad last go-round, and there appears to be a built in caution- they're walking the tight rope of building enough but not too much. This could change, but if you look around there are not that many greenfield fabs being built nor planned relative to the last upturn. And don't forget Morgans three waves, for the semi equips. The most important will always be demand vs. existing capacity, which I agree looks very much in our favor for some time, but 300mm and new materials are drivers as well. Capacity and 300mm overlap, of course, but if you go 300mm everything must be new, not just some adds to an existing fab.

To: hhieslmair who wrote (68)	7/29/2000 12:02:01 PM
From: Cary Salsberg	Read Replies (1) \| Respond to of 195

As you said, demand keeps growing in a smoother fashion than supply does. Supply comes online as the result of $2-3B quantum leaps (fabs). Anti-trust and competition prevent much cooperation in creating supply. You balanced increased diversity of demand with increased flexibility of modern fabs to meet it. These both add complexity and make it more, not less, difficult to match new capacity 18 months from now to increased demand that far out. By the way, I have a bridge to sell you if you are interested<g>

To: hhieslmair who wrote (68)	7/31/2000 3:54:39 PM
From: Nevin S.	Read Replies (1) \| Respond to of 195

hhieslmair, very cogent analysis of the semi conductor market. Two things I'd like to add. First, with many companies going fabless, this decreases the tendency for overbuilding of fab capacity. It should be self evident, but for the uninitiated, under the old model every chip company (and their brother) set up chip manufacturing facilities because they wanted to control production of their products. As fabs became more expensive, a lot of specialty firms went fabless as they realized that they could not keep up with other larger firms on the process side of the business and the capital expenditures and obsolescence on the production side were killing them during industry downturns. Enter the contact manufacturing firms like Taiwan Semi and United Micro. Instead of 50 different chip design houses creating capacity for their respective products, now you have a handful of manufacturers that specialize in process and production. If one company loses business to a competitor, manufacturers adjust production schedules and slip in the competitors product or another company's chip where there is unused capacity. This is a much more efficient way of doing business for both designers as well as contract fabs. Instead of everybody trying to gauge chip demand, you have a few consolidators that see demand from many different points in the market and adjust accordingly. If the fabs overbuild, they could conceivably go to companies like MU and INTC and take on some production to fill fab space. The other point I'd like to make is that at least for the foreseeable future, none of this will matter. The reason: just as generals always fight the "last war" and inevitably make mistakes for looking backward not forward, Wall Street analysts, like SSB, will continue to think that semiconductor markets are cyclical and 99% correlated to the PC industry. Just my opinion on this but then I have little confidence in an industry that needs money moving from one segment to the next to make a buck for themselves. Wall Street can't stand a buy and hold strategy - there's no profit in that so they have to keep you and me chasing the next hot sector or the promise of one would be more like it.

To: hhieslmair who wrote (68)	8/2/2000 1:03:18 AM
From: The Prophet	Respond to of 195

Very well-reasoned, thanks. As an investor, I have an additional reason to like some of the chip-related stocks, such as SNDK and KEM; they have already more than priced in a chip glut. Question: what better than when the market more than prices in a glut, and the odds are a glut is not on the horizon? Answer: maybe chocolate.

To: hhieslmair who wrote (68)	8/7/2000 12:18:49 PM
From: Math Junkie	Read Replies (1) \| Respond to of 195

Thanks for a very impressive analysis. You mentioned that, "The next chip glut will occur only when the global economy sinks, not by over capacity." That seems to be the biggest risk visible at the present time: whether the Federal Reserve will be successful at engineering a "soft landing" for the U.S. economy, or whether they will overshoot and create a recession. The odds historically are about 50/50.

To: hhieslmair who wrote (68)	8/10/2000 5:00:25 PM
From: Katherine Derbyshire	Read Replies (3) \| Respond to of 195

>>Fab throughput (supply not as high as feared) It is true that the next 300mm wafers with 0.13µm gates can contain approximately 5x the chips that the present 200mm 0.18µm wafers carry. Yet it is also true that because of the single wafer processing, and more process steps, that same 300mm wafer will take longer to process. << Not much longer. The fabs have set equivalent wafer throughput as the benchmark they want equipment companies to meet. That is, if a tool processed 100 200-mm wafers per hour, the equivalent 300-mm tool should also process 100 wafers per hour. If a 300 mm fab can't make substantially more chips than a 200mm fab, then there's no reason to build it in the first place. You may not get 5x, but you'll get a lot of chips. This whole argument is a red herring, though. Companies will build enough fabs to meet a given capacity goal. If their goal is too high, overcapacity will result no matter what wafer size the fab runs. >>Sematech does not have everybody in step anymore. << They never did, because only a handful of companies were Sematech members. Sematech actually has more members now than they used to, and the offloading of technology expertise to the equipment companies has leveled the playing field to a certain extent. >>Not all the chip companies have embarked on 300mm, and those that have are on different time schedules, and can halt 300mm build out should over capacity raise its head. << Leaving them with a multi-billion dollar hole in the ground and no way to recoup the investment? I doubt it. They're more likely to try to build out faster in order to beat the other guys. >>Additionally, it has been pointed out by Sue Billat at Robertson Stephens, some semi equipment is in tight supply and will naturally slow down capacity increases.<< Yes, I read that interview, too. I don't recall any implication that cycles were a thing of the past. >>An increasing diversity of market segments and chips (different supply and demand)<< This is the most solid argument you make. However, letting different types of chips share a single capacity pool is not necessarily a good thing. Too many DRAMs and not enough DSPs? Okay, we'll make DSPs instead and create a glut there, too! >>Cheaper processing power means demand for more chips (trend for increasing demand)<< DRAM sales reached a record high in bit terms in 1996. A down cycle can easily coexist with strong demand. >>Perhaps some might argue, the time to build capacity is so long, that getting an overproduction signal early will not help.<< Yes, exactly. >> But here too, the 300mm fabs are special. These fabs will be able to shift production to other chips. Future 300mm fabs will be nimble because 300mm fabs will be completely automated.<< This makes no sense. First off, fab automation doesn't do much for process flexibility. Either your process can run other chips or it can't. Very specialized equipment does not become more flexible by simply connecting robots to it, and buying new tools is not a simple matter of going down to your local hardware store. Second, ability to shift to other chips actually increases the risk of global overcapacity. When one segment gets flooded, the overflow takes down other segments instead of just sitting idle. >>Such systems can make the introduction of a new process for new chips almost painless.<< Ever worked in a fab? I've never met a single process engineer who would agree with this statement. Katherine