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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Jacob Snyder who wrote (43271)	3/6/2001 11:29:21 PM
From: A.L. Reagan	Respond to of 70976

Jacob, I agree with both yours and Andy Grove's reasoning, but draw a distinction between capex primarily designed to improve margins by reducing fabrication costs, and capex primarily intended to increase overall production capacity. We have such a clear recent (and ongoing) parallel with the telcos and their cap equipment suppliers that really supports your position. I'm sure you remember the arguments that all the telcos would have to endlessly increase capacity or their competition could undercut them, and how that guaranteed a perpetually rosy future for all the telco suppliers... which might have worked except that... oops, the telcos flat ran out of money to keep playing that game. So, I'm old fashioned like you. Until the semis themselves show improvement in their B2B's, it is hard to see how the AMATs/KLAC's/NVLS's of the world will get much traction. They may sell the latest and greatest fab equipment to upgraders, but without end market improvement (a) there't won't be significant new fabs built; and (b) some of the semis will choose to flat out exit unprofitable lines, just as INTC did out of DRAM years ago for the reasons cited. (BTW, I don't think history has viewed this as a bad move on their part.) Accordingly, this will limit AMAT's addressable market. BWDIK, maybe this time the WS analyst cheerleading fraternity has got it right this time about the semis - witness the SOX rise 27% in a week. I doubt it, and am looking to short SMH (and MU again @ $48) if there's a continued rally defying logical reason. We haven't yet begun to see the economic slowdown in Europe and Asia which is a 100% certainty to follow when the U.S. economy goes in a funk. Last time I checked, AMAT sold a ton of stuff in Asia. W/r/t CSCO, I'm glad there is improved visibility, but that doesn't mean improved sales. P.S. Glad to hear Grove's grim report on the PC processor market, having SS DELL today also.

To: Jacob Snyder who wrote (43271)	3/7/2001 9:12:46 AM
From: Katherine Derbyshire	Read Replies (1) \| Respond to of 70976

>>. And, if Intel does spend what they say they are in 2001 on capex, then the problem just gets worse: inventories, capacity utilization, margins, etc., will all go the wrong way, as long as capacity is added in the current market environment. << Except it's not quite that simple. What will demand be in 18 months when the new fabs come on line? If it stays stagnant, then all the problems you mention occur. But if it goes up, and Intel doesn't build the fabs, then AMD eats their lunch. Which is one of the reasons for the wild swings in the semiconductor industry. Adding capacity takes longer than the accurate forecast horizon. Katherine