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

To: Return to Sender who wrote (12617)	11/23/2003 1:38:07 AM
From: StanX Long	Read Replies (3) \| Respond to of 95587

More Chip Makers Going 'Fabless' to Lower Costs By Doug Young Sunday November 23, 5:08 AM HONG KONG (Reuters) - Chip makers ranging from giants Motorola Inc and Texas Instruments Inc to younger mid-tier companies are finding that letting others manufacture their technology-intensive products makes good business sense. The move toward a "fabless" business model, where firms focus on chip design and marketing but leave capital-intensive production to others, is helping drive down costs for makers of chips that power gadgets from PCs to cellphones and DVD players. U.S. semiconductor and communications gear giant Motorola recently agreed to transfer ownership of a $1 billion chip-making plant, or "fab," in China to Shanghai-based Semiconductor Manufacturing International Corp (SMIC), a so-called foundry that makes chips based on the designs of its customers. The fabless trend has opened up the industry to a crop of upstart chip designers that in the past would have been locked out by the prohibitive cost of production facilities that can run into billions of dollars. "Fabless has become a real business model because you can have three or four people who have ideas and they don't have to invest in the manufacturing site," said HSBC Securities analyst Abraham Leu. "It's much easier for people who have ideas and don't have money." Last month's agreement to transfer its only China chip plant to SMIC was part of Motorola's ongoing "asset light" approach, said spokeswoman Mary Lamb. "Motorola has an outsourcing strategy to leverage resources during the industry's cyclical ups and downs and to continue to hold down capital expenditures," she said. FABLESS FUTURE Fabless production accounted for $16-$17 billion -- or about 11 percent -- of the semiconductor industry's estimated $150 billion in output last year, according to the U.S.-based Fabless Semiconductor Association (FSA). Output by fabless producers is expected to grow to 14 percent of the industry's forecast $205 billion of annual output by 2005, according to the Semiconductor Industry Association and research firm Dataquest. The fabless trend dates to the mid-1980s, when a field of idea-rich but capital poor upstarts entered the industry. A corresponding group of contract manufacturers -- most notably Taiwanese giants Taiwan Semiconductor Manufacturing Co Ltd (TSMC) and United Microelectronics Corp -- sprang up to fill the need for production capacity. This year alone, the pair are expected to post combined revenue of $8.4 billion, compared with an expected $6.7 billion for the world's biggest semiconductor maker, Intel Corp, which still makes its own chips. The move to fabless output should accelerate in the years ahead as chips become more sophisticated and the equipment to make them grows more expensive, analysts said. A factory to produce high-end semiconductor wafers with 300 millimeter diameters -- a cutting-edge product -- costs between $2 billion and $3 billion on average, said Chris Chang, a senior marketing official at SMIC. Most major fabless chip designers are in the United States and Taiwan, whose government has aggressively promoted development of the technology industry. The U.S. companies include Qualcomm Inc, Conexant Systems Inc and Xilinx Inc, while big Taiwanese competitors include VIA Technologies Inc and MediaTek Inc. Some industry heavyweights such as Motorola and Texas Instruments use a hybrid model, making some chips in-house and contracting others out to foundries. In a nod to Taiwan's growing prowess, the FSA last month set up its first non-U.S. office in Taipei. It estimates the island now accounts for about 25-30 percent of fabless output, with the United States accounting for most of the rest.

To: Return to Sender who wrote (12617)	11/23/2003 8:28:24 PM
From: Donald Wennerstrom	Read Replies (2) \| Respond to of 95587

RtS, First of all, let me compliment you on the "long term" monthly tables you have referenced and posted on your web site. These are great reference tools, particularly so since they are updated continuously and therefore are always available as up to date long term charts. Your indicators on the charts are great as well. I looked at all the charts, and your comments in your post, and I can find nothing that I take issue with. As you noted by each stock, some of them look quite strong(MTSN and CMOS certainly fill the bill here), while others look "medium" well off, and others are "folding over". This of course corresponds to the table that I put forth yesterday showing performance of each stock over the period of 9/5/02 to last Friday's close. Having said that, how do we find the best potential performers going forward - we know what happened in the past few months up until Friday's close, but how can that help us look into the future and predict what will happen by next Friday. Frankly, I don't know. I have been doing these weekly tables long enough to know that last weeks performance does not translate into knowledge of what is going to happen in the coming week with much, if any, confidence. The only thing I can say is that the old saying, "the trend is your friend until shown otherwise" probably has some value, but as you know there is another saying "at some point, the trend will always change". Take your pick of what will happen to MTSN and CMOS in the coming week or few weeks. Having said that, let me change course a little bit and post a couple of tables I put together when reviewing and responding to your post, trying to find an answer to your question "about best potential performers going forward". These tables show the amount of percent gain from Oct 1998 to the peak price in 2000, and then the amount of percent gain from Oct 2002 to last Friday's close. The table allows you to compare each stocks price percent gain over the 2 periods. If you believe we are still going up the left side of the bubble like we did from 1998 to 2000, each stock has a long way to go, some more than others, until the new "bubble peak" is reached. - 2000 - 10/08/98 HIGHEST 10/9/02 11/21/03 98to20 02to03 - CLOSE CLOSE CLOSE CLOSE PERCENT PERCENT SYMBOL PRICE PRICE PRICE PRICE CHANGE CHANGE PHTN 2.25 90.38 16.15 37.99 3917 135 LTXX 1.31 50.25 3.33 15.50 3736 365 ASYT 3.13 63.88 3.95 16.25 1941 311 LRCX 2.93 55.56 6.72 29.49 1796 339 MTSN 2.75 49.13 1.65 13.60 1687 724 CMOS 5.00 74.59 6.30 14.25 1392 126 TER* 7.82 110.00 7.22 23.79 1307 230 ASML 4.38 50.05 5.28 17.97 1043 240 BRKS 8.38 89.69 8.95 23.51 970 163 AMAT* 5.59 57.44 10.41 22.96 928 121 CYMI 6.50 65.25 16.74 43.64 904 161 NVLS* 7.30 69.94 20.17 42.54 858 111 HELX 7.88 75.38 7.48 20.11 857 169 SMTL 2.57 23.69 4.29 11.10 822 159 KLAC* 10.94 97.44 26.15 55.05 791 111 COHU 6.75 59.50 9.99 19.47 781 95 KLIC 5.19 43.00 1.95 15.36 729 688 WFR 3.63 23.75 4.70 9.55 554 103 EGLS 7.94 43.44 1.21 3.44 447 184 FSII 4.25 23.13 2.36 5.82 444 147 VECO 21.63 115.50 9.40 28.65 434 205 ATMI 11.50 60.00 12.44 22.08 422 77 PLAB 9.50 45.13 7.90 18.40 375 133 DPMI 17.88 78.81 16.07 22.79 341 42 UTEK 13.56 23.50 6.77 29.08 73 330 TOTALS 180.56 1538.43 217.58 562.39 752 158 SOX-X 189.90 1332.73 214.06 502.66 602 135 COMPQX1419.12 5048.85 1114.11 1893.88 256 70 * STOCKS INCLUDED IN SOX INDEX - 2000 - 10/08/98 HIGHEST 10/9/02 11/21/03 98to20 02to03 - CLOSE CLOSE CLOSE CLOSE PERCENT PERCENT SYMBOL PRICE PRICE PRICE PRICE CHANGE CHANGE MTSN 2.75 49.13 1.65 13.60 1687 724 KLIC 5.19 43.00 1.95 15.36 729 688 LTXX 1.31 50.25 3.33 15.50 3736 365 LRCX 2.93 55.56 6.72 29.49 1796 339 UTEK 13.56 23.50 6.77 29.08 73 330 ASYT 3.13 63.88 3.95 16.25 1941 311 ASML 4.38 50.05 5.28 17.97 1043 240 TER* 7.82 110.00 7.22 23.79 1307 230 VECO 21.63 115.50 9.40 28.65 434 205 EGLS 7.94 43.44 1.21 3.44 447 184 HELX 7.88 75.38 7.48 20.11 857 169 BRKS 8.38 89.69 8.95 23.51 970 163 CYMI 6.50 65.25 16.74 43.64 904 161 SMTL 2.57 23.69 4.29 11.10 822 159 FSII 4.25 23.13 2.36 5.82 444 147 PHTN 2.25 90.38 16.15 37.99 3917 135 PLAB 9.50 45.13 7.90 18.40 375 133 CMOS 5.00 74.59 6.30 14.25 1392 126 AMAT* 5.59 57.44 10.41 22.96 928 121 NVLS* 7.30 69.94 20.17 42.54 858 111 KLAC* 10.94 97.44 26.15 55.05 791 111 WFR 3.63 23.75 4.70 9.55 554 103 COHU 6.75 59.50 9.99 19.47 781 95 ATMI 11.50 60.00 12.44 22.08 422 77 DPMI 17.88 78.81 16.07 22.79 341 42 TOTALS 180.56 1538.43 217.58 562.39 752 158 SOX-X 189.90 1332.73 214.06 502.66 602 135 COMPQX1419.12 5048.85 1114.11 1893.88 256 70 * STOCKS INCLUDED IN SOX INDEX