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

To: Cary Salsberg who wrote (5727)	9/29/2002 5:19:17 PM
From: Alastair McIntosh	Read Replies (1) \| Respond to of 95607

I was responding to Don's post from which I inferred that he suggested that there was a long term linear relationship between chip revenue and SCE spending. I am not postulating a fundamental change in the industry. What I am saying is that the decreasing capital requirements per unit of IC output will result in an increasingly lower percentage of IC revenues falling to the SCE manufacturers. My guess is that the ratio of capital equipment spending to IC revenue is falling fast enough to lower the long term growth rate of the SCE group. Consider that a 300 mm wafer produces about 2 1/2 times the number of chips than a 200 mm wafer for a 30% increase in the cost of the tool (lithography excepted). Also, as the 300 mm lines are more automated, production cycle times should be reduced. We have not previously seen such a huge increase in efficiency. Also, it is not correct to say that chips always get cheaper. Annual average semiconductor ASP's rose steadily from 1990 through 1995, fell until 1998, rose in 1999 and 2000 and have fallen back to 1990 levels this year. Maybe I'll be proven wrong (it wouldn't be the first time)and IC unit growth will be rapid enough to overcome the capital and production efficiencies so that historic growth rates in the sector will hold for the long term. In the meantime the cycles will continue. I just need someone to tell me when we are at a peak or a trough.;-)