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Technology Stocks : Semi Equipment Analysis -- Ignore unavailable to you. Want to Upgrade?

To: Donald Wennerstrom who wrote (5708)	9/28/2002 7:24:33 PM
From: BWAC	Read Replies (1) \| Respond to of 95579

So at what fab utilization rate would expenditures on equipment start for real? 90%?

To: Donald Wennerstrom who wrote (5708)	9/28/2002 8:59:20 PM
From: Zeev Hed	Read Replies (1) \| Respond to of 95579

Donald, for the equipment makers, the situation is actually even a little better, while the chip sales, year over year might be only 7%, the number of devices sold, or shall I say the silicon real estate (which is what controls the capacity utilization) shipped growth is probably another 5% more, or like 12%. For instance, MU just reported declining sales relative to last quarter, but increase in Mbytes shipped of 20%. The pricing environment has been very weak, due to over capacity and relatively weak end markets, but still the the shipments levels of chips, at least by the leaders in their respective fields, keeps increasing. The question of capacity is also a strange one, in post following yours, you are asked if capacity additions requires capacity utilization of 90%, and the truth is that it depends which fabs. Old technology fabs will suffer under utilization and eventual shut down, but Samsung and TMSC, for instance, have a policy to start adding capacity when their most advanced fabs get close to 80% utilization rate. Suffice to say that the source of funding expansion is not current profits as much as current cash flow, for instance INTC does not have to touch any of its profits to maintain its current capex budget, all of the funding comes from depreciation leaving quite a lot. In the last four quarters, INTC reported $5.602 B in depreciation charges, but only $5.046 in capex (there are some inconsistencies with the reported numbers, IMTO, since their quarterly depreciation has gone from $1.6 B n th 9/01 quarter to only $1 B in the June 02 quarter, but that is a separate story). I checked NU's books as well and their depreciation rate is below their capex. Thus I think that despite the malaise, the industry is generating enough cash to expand capacity, once they have better visibility of end demand improving. Zeev

To: Donald Wennerstrom who wrote (5708)	9/29/2002 11:39:56 AM
From: Alastair McIntosh	Read Replies (1) \| Respond to of 95579

Donald, I don't think that you can make this assumption: - over a period of time, chip equipment sales(both number of chips and/or dollar value) should have a direct "correlation" with semi-equip sales The opposite is more likely to be true. 300 mm and shrinking line widths mean that incremental production comes at increasingly lower capital requirements. Your assumption was true for a while but will probably not be true in the future.