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Politics : Ask Michael Burke -- Ignore unavailable to you. Want to Upgrade?

To: Knighty Tin who wrote (82633)	7/31/2000 10:38:23 PM
From: geewiz	Read Replies (1) \| Respond to of 132070

Hi Michael, SANM is one of the stocks that humbled me also; sent me back to the cave for a while... So is it reasonable to bet against the assembler sector? If we are having shortages of flash memory, my guess is it would hurt this part of the tech sector more that an OEM's or the Fabs. Nokia gave what sounded to me like a total BS spin on earnings outlook last week; Nokia insists that the slowdown in earnings is purely a matter of timing with the launch of several new products - most notably the mass volume 6210 handset - delayed by a couple of months. With older models facing constant price erosion, this means that Nokia's product mix will be less favourable during the third quarter and therefore operating margins will drop below the record 25 per cent achieved in the second quarter. By the fourth quarter, things will return to normal, the company says. but your post about shortages at cyclical peak puts a credible angle on this company statement. The Financial Times had a piece last Friday which examined these shortages. At first I dismissed it due to the included mention of a shortage in DRAM - a story that few readers of this thread believe; however it is possible the journalist got some of the facts right, so I'll post the first three paragraphs; Not enough chips to go round A global shortage of components is limiting supplies of many electronic devices, say Caroline Daniel and Tom Foremski Published: July 27 2000 19:41GMT \| Last Updated: July 28 2000 13:47GMT Thousands of mobile phones lie silent in factories. Digital cameras rest half-completed on the shelves. Cable operators cannot get enough set-top boxes for digital television. And the emergence of big optical network projects is being curbed. The problem is chip shortages. For the lack of a simple chip costing a few dollars, companies are unable to complete the manufacture of a wide variety of products. The shortage first emerged this year in a spate of earnings warnings. But it is now dogging tens of thousands of companies producing anything electronic - even toys. Mattel and Hasbro, leading US toy companies, warned on Wednesday that sales may be affected. While the shortages began with flash memory and microprocessors they are now spreading to a wider range of components including D-Rams - standard memory chips. Until recently these were in such abundant supply that many companies pulled out of the market because of a global glut. This squeeze is the by-product of the enduring semiconductor chip cycle, where chip production rotates from under to over supply. Worldwide under-investment between 1996-1998 in chip factories, which now cost about $2bn apiece and take two years to build, is partly to blame. No chipmaker wants to be caught with an under-utilised plant. The credible part is the lack of capital spending coincident to the asian crisis. We all expected to see plants shut; in hindsite was it this lack of capital spending that adjusted the excess? Surely a commodity market with such short cycles and high capital costs the rebalancing will be characterized differently than a mature industry as autos. So which sectors will feel the max pain first? If the assemblers cannot deliver....yet fabs are still being built to supply the shortage.... I begin to see my AMAT NVLS KLAC puts are a speculation on a general market decline, and not a wise sector choice at this initial cyclical peak. Whereas SLR SANM JBL CLS and FLEX may disappoint very soon. Thanks for your thoughts, art