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To: Nevin S. who wrote (10549)	7/26/2002 11:09:00 AM
From: Robert Douglas	Respond to of 10921

I don't expect significant capacity expansion until the recovery is well underway. Capital expansion is almost always tied to capacity utilization and profits. When the demand for semiconductors picks up, those companies with the most efficient production process will be the most profitable. It is these firms that will have the ability to expand. Those that don't will enter a vicious cycle of decaying capital and unprofitability. You will see a consolidation take place which will further increase margins at those same profitable firms. Then you will get overbuilding and the cycle will repeat. That's how I see it anyway.

To: Nevin S. who wrote (10549)	7/26/2002 11:55:13 AM
From: Cary Salsberg	Read Replies (1) \| Respond to of 10921

I don't think you can look at foundries as an outsourcing entity. TSMC rivals INTC for the most advanced fab processes. If leading edge is slowing, then it is safe to assume the whole industry is slowing. These variations reflect more careful management than was typical of "normal" cycles and reflects the fact that purchases are primarily for improving process technology and increasing leading edge capacity not to meet projected industry capacity requirements.