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To: Gottfried who wrote (37002)	8/26/2000 1:44:14 AM
From: Jeffrey D	Read Replies (1) \| Respond to of 70976

Analysts again revising upward the estimates for future capital spending. Jeff << Analysts Revise DRAM Forecasts...Again -------------------------------------------------------------------------------- Story Filed: Friday, August 25, 2000 5:34 PM EST Aug 25, 2000 (Tech Web - CMP via COMTEX) -- Industry analysts are revising their already revised mid-year forecasts for semiconductor growth and capital investments. The prediction? Previous estimates of runaway growth may still be too low. Analysts agreed Wednesday that wafer fab investments are 80 percent higher than a year ago, and that chip revenues could exceed 45 percent growth in 2000 from 1999 sales. Just 6 weeks ago, market researchers raised projections for semiconductor capital spending growth in 2000 to 60 to 70 percent. And in June a mid-year 2000 forecast recorded 31 percent growth in chip sales to $195 billion, according to the Semiconductor Industry Association. But if these numbers sound strong, new forecasts say that estimates need to be ratcheted up once again. Why? It's partly due to a strong summer of plant investments and demand for semiconductors. But it's also that the lagging DRAM segment has not had a significant impact on growth rates in plant investments and chip revenues. Analysts from Dataquest and VLSI Research explain. Memory manufacturers are holding back potentially huge investments in new capacity as they wait for signs of shortages. "Why spend money on capacity when you don't need more capacity?" said VLSI Research president G. Dan Hutcheson. DRAM manufacturers in Asia aren't likely to make major new investments until they see more profits and higher prices, he said, referring to the last cycle 5 years ago when too much memory capacity was brought out. "I'm just happy about the lack of DRAM fab investments in the current strong business cycle because they have been the problem all along." Dataquest analyst Klaus-Dieter Rinnen said that DRAM makers were moving closer to making investments in new wafer-processing capacity since shortages of memories were beginning to appear. Samsung Electronics (stock: 05930.KS), for example, decided to hike up capital spending to $4.1 billion in 2000 -- instead of its original budget of $2.6 billion. He predicts a shortage of DRAM production capacity to start in the third quarter of 2000, which will last until the second quarter of 2002, and eventually give way to another memory glut in the third quarter of that year. The strong investment cycle in new chip plants continues to be driven by logic manufacturers and foundries. Last year, capital investments in memory plants represented just 25 percent of the total, Rinnen said. But in 2000 that percentage will grow to 32 percent, counting both flash and DRAM investments. Typically, 30 to 35 percent of semiconductor capital investments goes to memory production, but in an up-cycle -- which the industry has experienced for 18 months -- DRAM investments take 45 to 50 percent of the total. VLSI Research analyst Hutcheson says lower investments in DRAM production capacity are a result of lower memory requirements in many of the system applications now driving semiconductor unit growth. Wireless and cell phones, for example, require flash memory, but not much DRAM as compared to PCs, which have been the main growth engine of the past 3 recovery cycles. Overall, chip pricing has fallen sharper than expected in 2000, Hutcheson Wednesday told the Semiconductor Equipment and Materials International trade group (SEMI). VLSI Research tracks chip pricing trends at the start of the year with a value of 100, and in a typical year, that figure will drop to 70 -- representing the historical Moore's Law curve of 30 percent annual reduction in the cost of a transistor per Mhtz. "We're now running in the low 60s," Hutcheson said, referring to the erosion of average selling prices for chips. "And so far this summer, we haven't seen the forecasted uptick in memory prices." Hutcheson places current semiconductor capital spending growth -- without significant involvement from DRAM makers -- at 87 percent over 1999. His models show 2001 will grow another 30 percent. Semiconductor revenues are now expected to increase 44 percent in 2000 and 45 percent in 2001, according to the firm's preliminary outlook. Dataquest is also suggesting a high-side to its forecast in the high 70 percent range for capital equipment spending. Semiconductor sales growth could be strong enough to push total chip revenues to the $300 billion mark in 2001 -- a year ahead of the current outlook, Rinnen said. Analysts also agreed Wednesday that the current business cycle will continue longer and stronger than previous ones. "I think people are underestimating the strength of this cycle," said J.P. Morgan VP Clark J. Fuhs who recently left Dataquest as chief semiconductor equipment analyst to track chip supply and demand at the house. Fuhs also said semiconductor unit growth "has been hanging in the 30 to 35 percent range for the last 6-8 months" as compared to last year. In the last 3 business cycles in the late 1980s and 1990s, the industry never had been that high in chip unit growth. "We've never been +30 percent growth year-over-year." Semiconductor fab utilization tracked by the U.S. government continues to show plants running at over 95 percent since late 1999, Fuhs said. And analog semiconductor sales continue an unprecedented run as the leader in growth. "We have been in the cycle of recovery and strong growth for a little over a year now, and analog is still leading the charge. So this is a tremendous cycle. We've been in it for a good year-and-a-half now, and we think it has at least that far to go." techweb.com

To: Gottfried who wrote (37002)	8/26/2000 10:13:33 AM
From: Kirk ©	Read Replies (1) \| Respond to of 70976

Great Chart. geocities.com compare that chart to this log plot of AMAT for the same time period. chart.bigcharts.com '95/'96 and '98 have the largest drops in BtoB and show the biggest drops in price. Your chart shows we are nowhere near that and are healthier than last year when we saw more than a doubling in AMAT price. We might even expect your blue 2000 line to turn back up as DRAM equipment buys hit the books later this year (as predicted by Bagley long ago and the press is now starting to write about DRAM shortages) Backlog may be a better indicator of health and your chart shows this is healthy geocities.com Odds are this seasonal chart will also turn to increasing backlog as it did last year and we will see similar price action as we saw last year. I still think the odds are good that the low prices of this year so far have a reasonable chance of being lower than the next cycle lows. It dawned on my last night that once the new 300mm fabs are up and running, there will be equipment buys to convert 200mm fabs so it isn't like we fall off a cliff in 2002 when all the ordered 300mm fabs are built. Kirk out

To: Gottfried who wrote (37002)	8/26/2000 9:47:16 PM
From: StanX Long	Respond to of 70976

Thanks for the chart. It looks like a summer / fall dip is typical. I am looking for another dip on AMAT price to buy a few shares on margin. Read your threads as well as other who I respect here on SI. You inputs has me with 19% return YTD using AMAT yoy-yoy effect. Thanks to ALL who post (OT) threads on AMAT sting. SD