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

To: Gottfried who wrote (6990)	8/28/2003 12:11:04 PM
From: Proud_Infidel	Respond to of 25522

Riding the wave or headed for the reef? For chip makers that didn't spend the past two years preparing, it's too late to cash in on the recovery by Len Jelinek, Silicon Strategies 08/28/2003, 11:37 AM ET The following column was provided by Len Jelinek, a principal analyst with iSuppli Corp., an El Segundo, Calif.-based market research firm. As the semiconductor industry enters its third quarter of modest growth, it is apparent that the suppliers that developed long-term manufacturing strategies during the extended downturn are recovering, while those that failed to act decisively are being left behind. Semiconductor manufacturers, both foundries and Integrated Device Manufacturers (IDMs), first became aware in the fourth quarter of 2000 that the chip industry was entering a period of decline. Some suppliers responded to the downturn by going into denial, while other companies focused on developing long-term manufacturing strategies designed to allow them to emerge from the semiconductor depression stronger than before. Those that faced up to the downturn and planned ahead are now reaping the rewards, and are cashing in on the semiconductor manufacturing recovery. Semiconductor manufacturing capacity utilization has been rising steadily since it bottomed out in the third quarter of 2001. Utilization is expected to reach 81.5 percent by the fourth quarter, up from a low of 61.3 percent in the third quarter of 2001, iSuppli Corp. predicts. Total capacity is also on the rise. After falling to 703 million square inches per month in the second quarter of 2002, semiconductor manufacturing capacity will rise to 767 million square inches per month by the fourth quarter. Those companies that did not act decisively at the start of the downturn and failed to develop a strategy, or mismanaged their resources, now are not benefiting from the rise in capacity and utilization. Furthermore, it probably is too late for these companies to take advantage of the present recovery. The industry already has moved from the planning phase into the execution stage. However, it's not too late for these companies to develop a strategy now to prepare for future downturns and recoveries. iSuppli believes semiconductor makers must re-examine the health of their manufacturing strategies and answer the following questions: What is your corporate manufacturing strategy, and how successfully is your company executing the plan? Will your company achieve success by using an asset-light strategy that outsources most or all production, or will your firm strive to take a leadership position in manufacturing technology? Has your company consolidated manufacturing and relocated production of mature products to low-cost labor regions? Has your company developed and introduced leadership products that are gaining acceptance in the market? Over the past two years, the structure of the semiconductor manufacturing industry has changed as companies executed on their production plans. Semiconductor makers have split into two tiers: trailing-edge and leading-edge technology manufacturers. This contrasts with the broad-based semiconductor makers of the 1980s, which offered both old and new manufacturing processes. Companies that manufacture semiconductors using 150mm and 200mm wafer equipment at geometries greater than 0.25-micron have found ample availability of used tools on the market, allowing them to expand capacity cheaply. This availability of used tools reflects the extensive manufacturing consolidation that has taken place over the past two years. Many companies have shifted manufacturing to lower cost regions or have eliminated unprofitable businesses, and thus have sold off their excess semiconductor manufacturing equipment. Companies that are focusing manufacturing at the leading edge, using 200mm and 300mm wafers and geometries of 0.13-micron and smaller, are exercising caution and expanding their capacity slowly. iSuppli predicts that sufficient manufacturing capacity exists in the near term to meet demand for both trailing-edge and leading-edge products. Companies that manufacture using mature technologies, and that now have some idle capacity, will have to re-staff manufacturing operations starting in the first quarter of 2004, iSuppli predicts. Companies that manufacture at the leading edge must continue to expand capacity cautiously in anticipation of rising demand. As demand materializes, companies will expand their capacity by taking ownership of tools previously shipped and installed, but not released.