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Technology Stocks : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: limtex who wrote (20366)	5/30/2001 5:34:08 PM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

>>Do you think there is any surplus production capacity in the CF/SD areas?<< Limtex, when you use the term "surplus production capacity", it applies not only to the seller/distributor but also to the fabricators, which in many cases are the factories in Taiwan. We know that Taiwan Semiconductor and United Micro have been operating at well below capacity for some time, both in terms of making flash memory chips as well as microprocessors and custom ASICS. We also know that SanDisk and other flash memory assemblers/distributors were caught with excess inventory when their OEM customers cancelled orders last year. From the price cutting going on now, we can assume that the excess inventory still exists for SanDisk and its competitors. We also know that FlashVision, the SanDisk-Toshiba joint venture factory in Virginia, has begun production of MMC and SD cards and that once the new plant is capable of running at full capacity, that capacity will greatly exceed current demand. But why shouldn't it? One must assume the plant was built to meet demand over the next several years. Bottom line is that the combination of price cutting and excess capacity creates a problem for SNDK, its competitors, and its chip fabricators, with each having to bear some of the pressure. I would not be surprised if SanDisk reports continued pricing pressure and depressed sales in its next financial statement in July. On the other hand, SanDisk at least is in a position to receive some royalty payments from Lexar and others, so it should be able to do better than many of its competitors. Ultimately the issue of overcapacity will be resolved by an increase in overall demand for flash cards, and that seems to be happening already. Art