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To: Jurgis Bekepuris who wrote (47879)	10/14/2001 7:12:32 PM
From: techreports	Respond to of 54805

Here is a good article on the optics industry and JDSU.. wdm.pennnet.com Many have compared the fiber optics industry to the semiconductor industry, but that may be a bad assumption. The only way to fix the model is to change one of the assumptions—either unit and ASP growth rates for devices, or the manufacturing economics. We believe the latter is more likely to change. Let us compare the revenue productivity in the photonics and semiconductor industries. In 1983 Intel generated $52,000 in revenue per employee. Sixteen years later in 1999, Intel had increased its revenue per worker to $420,000 (see Fig. 1). This increase was accomplished despite the fact that ASPs decreased 25% per year over the same period. The main driver for this remarkable improvement in productivity has been the relentless effort of the semiconductor industry to increase wafer size, to improve yield, and to implement automated manufacturing processes. The photonics industry pales in comparison, a direct reflection of the highly labor-intensive process of photonics manufacturing. For an example drawn from the compound semiconductor industry, look at the difference between Vitesse and SDL (now JDS Uniphase). While Vitesse has almost doubled its revenue productivity in the last four years, achieving "Intel-like" numbers, SDL has seen basically flat revenue per employee. During this period, both companies greatly improved the yield and productivity of their III-V semiconductor operation. In addition, Vitesse also benefited from manufacturing outsourcing of CMOS products. What dragged down SDL was its expansion into the highly labor-intensive business of module assembly—not an uncommon problem in photonics manufacturing. Here's another interesting point.. In the gold rush era, people said shovel makers pulled in the money. A hundred years later, one may find interesting similarities in today's technology business—enabling-technology companies are often better investment vehicles than the device makers that directly serve the end markets. Over the past 30 years, equipment vendors (shovel makers) were better investments than semiconductor device makers by nearly a factor of seven (see Fig. 2). It depends. Applied Materials is a shovel makers, but Intel was the better investment. Intel created a open proprietary architecture and has gained a lot of market power to dictate OEMs and standards.. There really isn't a standard in fiber optics (like say x86), but it takes a lot of time and money to make sure your components work together with other components.. On the photonics side, the picture is far from clear. The technology supply chain remains under-developed. If JDS Uniphase is poised to become the Intel of photonics, where is the Applied Materials of photonics? What is the potential of this photonics enabling-technology (PET) industry? Analyzing these questions are important not just for companies such as ours that are always looking for great investment vehicles. It is also important for the overall health of the photonics industry. Not all industries work the same way. There doesn't have to be a Microsoft in the PDA market. Fiber optics may not offer the same type of increase/higher yields the semiconductor has. Here's the second part: wdm.pennnet.com

To: Jurgis Bekepuris who wrote (47879)	10/14/2001 7:57:38 PM
From: Thomas Mercer-Hursh	Read Replies (1) \| Respond to of 54805

I must admit that it is mostly art to me There is certainly some art in the practice of science, particularly in the intuition of directions to investigate and in forming of hypotheses with a good chance of survival. There are other places where art enters, but one would rather find something more dependable and so one hunts for what might have underlain the intuition, but which might be, at least in part, measurable and testable. In the current topic, which aspects do you see as requiring or [currently] relying on art? what would you use as MSFT's forward growth rate for 1980? That would depend on the theory under test. If the theory was basing forward growth rates on analyst estimates, then one would want historical analyst estimates. These should be a matter of record, but I don't know where one would dig them out. If one were using growth rates based on instanteous rate as per the financials, well then that is certainly computable now as then. To be sure, there are some difficulties in retro testing in trying to put oneself fully into the mood and perception one had at the time, but I don't think it renders the process impossible. Perhaps it is likely to render the test more likely to produce good results since one might use one's knowledge of history to influence the guesses back then, but whatever choices one makes, if one documents them, then someone else can evaluate, challenge, and make their own tests.