Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

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

To: Cary Salsberg who wrote (9754)	5/10/2003 7:45:03 PM
From: Big Bucks	Read Replies (1) \| Respond to of 95640

Cary, I respect your opinions but I'm not convinced because of the economics of scale involved. By and large, chips have become commodoties because of the huge manufacturing efficiencies that the semiconductor industry has experienced. Yes, chips can be produced very cheaply en masse, but as with every commodity the more prevalent the product the cheaper it is which really compresses profit margins. Pretty much gone are the days when specialty chips sold for >$1000 and profit margins were 500%. Now days, manufacturers develop specialty chips and sell them in lots of 10,000 for $2 to $5 with a profit margin around 20%. Most fabs have multiple product lines that each address niche or specific markets. Competition is keen and new improved designs are constantly evolving. The current strategy is to sell an integrated chip to replace several other types of chips with a single chip. This means that it takes less chips, at less up front cost to do more processes. Integration is a wonderful thing, unless your company has a less versatile or cost effective chip to compete. I suspect that foundry's will continue to do well, since they offload the burdened costs of investing in and owning/managing a fab, so that all a chip development company has to do is develop the architecture and software and contract out the chip manufacturing and then market the end product. I understand the efficiencies of scale in manufacturing, but today fewer foundry fabs can produce massive quantities of chips. That means that less semi-production equipment will be sold, albeit at a higher price per tool. If this is true then tool manufacturers need to really streamline their manufacturing capacity since they won't be selling mass quantities of equipment in the future. My other point of contention is that I don't see any of us becoming Borg-like in the near future. People like simplicity, functionality, and inexpensive "tools" that are user friendly and non-cumbersome. Only the elite techno-crats or road warrior salesmen will be willing to shell out high dollars for gimmicks that serve universal purposes, IMO. Most consumers don't have an urgent need for frivolous gadgetry unless functionality and low cost make it a staple requirement. Personally, I want a cell phone to make calls with, I could care less about sending pictures, playing games, talking to me, or vibrating me (well, let me rethink that last one), or the myriad other integrated functions that are standard on todays phones. Call me old fashioned, but I don't need to be able to play games on a tiny device the size of a matchbox.......LOL... BB