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Technology Stocks : Applied Materials No-Politics Thread (AMAT) -- Ignore unavailable to you. Want to Upgrade?

To: Gottfried who wrote (4720)	1/3/2003 11:23:44 PM
From: Sarmad Y. Hermiz	Read Replies (3) \| Respond to of 25522

>> Either chip makers have enough capacity or they have cold feet. Gottfried, Regarding the 2nd chart showing semiconductor shipments. home.attbi.com It shows shipments of $3B/month in late 2000. That was 2 years ago. Obviously there was fabrication capacity to produce all those chips. Now semi shipments are at half that level - under $1.5B/month. I wonder how that works in terms of units. Obviously capacity is for units - not dollars. Assuming that the useful life of fabrication equip is several years. It seems there is enough equip in place to take care of all the old applications. So I assume only new designs need new fab equip. And how long does it take for "new" chips to become the majority of chips ? Prior to mid-1999 there were no Intel Pentium processors at the 1 GH speed. Since mid-2002, you cannot find any Pentium chips slower than 1 GH. I assume that increasing the speed required new fab equip. So possibly 3 years is the life-time of a chip design. I think the same logic and timing applies to how digital cell phone service displaced analog. And maybe also to how LCD panels are displacing computer monitors. And DVR'd are displacing VCR's. And DVD's are displacing tape. So my spotty argument tells me that even though there is 50% unused capacity, it will all be obsolete by the end of 2003. Which may still be considered a U in Jacob's reckoning, rather than a V. However, very likely most investors will want to be long rather than short well before the end of the year. Sarmad

To: Gottfried who wrote (4720)	1/4/2003 8:39:49 AM
From: Road Walker	Read Replies (2) \| Respond to of 25522

Gottfried, Thanks again for the great charts. re: http://home.attbi.com/~gottfriedm/SEMIcharts/SEMIsemi.gif Either chip makers have enough capacity or they have cold feet. That disconnect between chip sales and equipment bookings is unique, the two have never diverged as much as they are now. MHO, one of two things is happening: 1. The semiconductor manufacturers anticipate a weak period coming in 2003, and are reluctant to invest. 2. The semiconductor manufacturers have become over-cautious, because of the long down period in the market, the current earnings pressure, and the geopolitical situation, and are reluctant to build capacity even in the face of increasing demand. IF the latter is true, the implications could be bullish for the semiconductor companies and the equipment manufacturers. 1. Most of the companies are running pretty lean right now, if demand continues to increase, in a high capital investment business, GM's should be very high on the incremental sales. (In a high fixed cost, low variable cost business like semiconductors, incremental sales dollars go largely to the bottom line). 2. If the disconnect continues, you will start to see shortages in some chip categories (especially with record low inventories in the channel). ASP's will rise, further enhancing gross margins. (I've been reading capacity utilization is at about 70%, with general inefficiency in mind, my WAG is that shortages would begin somewhere around 85%[?]). 3. There would be a subsequent spike in chip equipment orders. But there would be a significant catch up period before that equipment can be put to use to alleviate the tight supply. Of course everything depends on end demand, and the signals are mixed in that regard. The next three weeks of earnings conference calls will be very interesting, starting with Intel on 1/14. They should make the end demand picture much clearer. John