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 : WDC/Sandisk Corporation -- Ignore unavailable to you. Want to Upgrade?

To: Road Walker who wrote (24165)	12/8/2003 9:26:51 AM
From: Art Bechhoefer	Read Replies (2) \| Respond to of 60323

John, it is noteworthy that when Toshiba and SanDisk first decided to build a plant to make flash memory, they acquired a facility in Virginia that had originally been built by Motorola. It took about a year, maybe a little less, to equip the plant and get some limited production. Then Toshiba decided (probably for political reasons as much as economic ones) to give up the plant in Virginia and refurbish an idle plant in Japan. Since Toshiba owned both the Virginia and Yokaichi plants, SanDisk had no choice but to agree. Toshiba paid for the cost of dismantling the machinery and equipment in Virginia and reinstalling it in Japan. It appears that if the plant is already built, or almost built, one can begin new production in small quantities within a year. If Toshiba and SanDisk decided to build a new plant earlier, one reason must be that they didn't want to be caught in a shortage brought on by greater than expected demand. Such a shortage would place a company like Samsung in a much better position and maybe allow it to sell to retail outlets, as SanDisk has done. Maintaining market share and dominance particularly at the retail level ought to be of considerable importance. The present growth in demand is so great that SanDisk has ended up buying wafers from Samsung--a situation that could play havoc with margins if allowed to continue for any length of time. Put another way, as long as the demand is growing, a company is much better off making its entire product from the wafer on up, as long as it knows it can produce wafers at as low a cost as competitors. Looking at the prospects for 2004 (the whole year, not just a couple of quarters), I believe that SanDisk knows what it is doing in advancing its capital investment by a year. The notion that there is a glut is not nearly as reasonable as the notion that continued strong demand will REDUCE margins for SanDisk unless it gets new production going soon. Art