SALOMON SMITH BARNEY                                             Industry Note

Semiconductors
SIA Data Shows Unit Deceleration Continues

October 2, 2000           SUMMARY
                          * Dollars on the rise, but units decline slightly.
Jonathan Joseph             August shipments according SIA continued to
415-955-4998                accelerate slightly to 53% from 50% in July.  Units
jonathan.joseph@ssmb.com    continued to decelerate slightly, from 28.1% growth
Mark Bertagnolli            in July to 27.7% in August.  We continue to believe
415-955-4904                that the 34% growth tallied in February marked the
mark.bertagnolli@ssmb.com   cyclical peak.
                          * All geographies strong.  As in July, Asia-Pacific
                            showed the greatest growth in August, up 60% yoy
                            compared to 57% in July.  The Americas were also
                            solid, jumping 50% over last year, up from July's
                            46%.  Japan accelerated to 54% from 52% in July,
                            while Europe was flat at 46% growth.
SUMMARY (CONT.)

* PLD and analog strong, Flash slowing.  Flash continued to have the highest
  yoy growth rate of 147%, although this represented a deceleration from 156%
  in July (and 220% in February).  PLDs continued to show strength at 104%
  growth, in line with the growth rates of the prior two months.  Standard
  linear products slowed slightly from the torrid pace it held last month,
  dropping to 69% growth from 73% in July.  DSPs have leveled off at 55%,
  marking the same growth rate as in July. The biggest gain came from DRAM,
  which went from 89% to 106%, mostly due to higher ASPs.  Bit growth
  decelerated slightly from 80% to 76%.

* We believe the data, particularly the continued deceleration in units
  describes a slow rollover in the sector from the cyclical peak set in
  February. Shipments continued to accelerate slightly in the month largely
  because of easy comparisons for DRAM ASPs which began to decline sharply in
  September.  As a result, we would expect August or perhaps September to
  represent the cyclical peak in shipments.