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

To: runes who wrote (58932)	1/16/2002 1:54:59 PM
From: runes	Read Replies (1) \| Respond to of 70976

Positives for the semi equip industry - This is not the first time the industry has gone through a wafer size conversion. All of the points of my prior post were as true then as they are now. And yet the industry has continued to grow and flourish. CAVEAT: I am now forecasting future trends for the industry so consider the following with a fair amount of skepticism. MITIGATING FACTORS - 1) Much of the excess capacity is in older technologies, most of the chip growth going forward will be in the newer technologies. This will drive sales over the next few years to replace the older equipment well before chip volumes reach their old highs. 2) Spares costs will scale more with the # of die than with the # of wafers. Most of the critical spares - the consumables scale with the wafer size - larger electrodes, beefier power supplies etc. And spares are a significant contribution to the bottom line. Right now I would guess that they may be as much as 50% of sales and are the profit that is offsetting the loss on the equipment side. In good times they are probably 25% of the profit? 3) The semi equips have done an excellent job of scaling down to maintain profitability. And the hiring will lag behind the market growth. So the EPS will recover much faster than the capex will. 4) With the high chip density/equipment, downtime costs will be much higher. Already many semi companies pay for expensive service contracts to keep dedicated vendor expertise close at hand. I expect that those contracts will also grow relative to the cap ex. POINT OF REFERENCE - ...Back in the days when I was a young and eager 4" fab rat, I remember AMAT starting to pitch service contracts to us - we just laughed. There wasn't that much effort needed to sort out problems and do repairs in-house. I also used to do my own car repairs. These days I wouldn't dream of doing either. BOTTOM LINE - ...Going forward I expect that the cap ex contribution to EPS will be reduced. So even if the industry follows Intel to reduce cap ex by 20%, the impact on the EPS will be less, maybe only 10%?

To: runes who wrote (58932)	1/16/2002 5:12:15 PM
From: willcousa	Respond to of 70976

There is another side to this discussion which I don't have a handle on. That is that as processors get faster and cheaper per unit of computation they can begin to perform functions that were unthought of before because they were cost prohibitive. Today's example might be the chips in cars and now appliances. Tomorrow may be speech recognition. The things that are being done to sound and to communications are interesting. I expect that processors will do things with software that hardware does now.