Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Ian@SI who wrote (47303)	5/25/2001 5:24:45 PM
From: Sun Tzu	Read Replies (1) \| Respond to of 70976

Thanks Ian. That makes more sense. Still, amortizing it over the time period would mean spending $250B (plus whatever interest) to get $300B (plus present value of fab, which cannot be too much). It should still show up as a hit on profit margins... ST

To: Ian@SI who wrote (47303)	5/29/2001 2:20:06 PM
From: Katherine Derbyshire	Read Replies (1) \| Respond to of 70976

I'm saying that Bill McClean said that the chipmakers have spent $250B on capex in the last five years. (I haven't checked, but it makes sense as a ballpark number, $50B/yr x 5 years). At the same time, the annual sales for the chip industry are only $60B/yr greater than they were five years ago. (SIA's web page reports total sales of about $144 billion in 1995, vs $204 billion in 2000) So yes, Ian, that's a $250B one-time charge to fight over $60B in additional recurring revenue. In essence, McClean is arguing that the chipmakers are spending more on capacity than they are earning back in market growth, thereby contributing to a persistent overcapacity problem. And yes, overcapacity will, sooner or later, put pressure on chip company margins, and therefore on the equipment industry. Anyone care to put together a chart tracking gross margins for chipmakers (All SOX companies? All SIA members?) over the last few years? Katherine