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

To: Dave who wrote (24208)	12/9/2003 8:32:49 AM
From: Art Bechhoefer	Read Replies (3) \| Respond to of 60323

Whether it's better to build your own fab or outsource may be related to the age of the industry. A comparison with the automobile industry may be revealing. In the late teens and early 1920s, Ford became the low cost producer, partly because it integrated vertically, starting from steel production to engines, parts, bodies and extending to final assembly. GM also made most of its parts well into the 1970s, when it began outsourcing (partly to reduce union influence). At the earliest stages of production in a new technology, it appears that capital constraints force a company to buy key components from other fabricators. As soon as enough capital is available, companies prefer building their own facilities, probably as much for control as for efficiency. Later on (much later, in the case of automobiles), a company looks worldwide for the lowest cost parts. From links provided by Aus, it certainly looks like Samsung is taking the lead in not only integrating flash production but combining it in a single chip with other functions. This has been difficult to achieve in the past. I think Intel has been somewhat unsuccessful in combining a microprocessor with memory, though they keep building more and more features into chips, allowing for additional functions such as Wi-Fi. The initiatives taken by Samsung run true to form: Obtain market dominance at any cost and then gradually drive out lesser competitors. At the moment, SanDisk is able to hold its own with the big time companies through its proprietary designs and its collaboration with Toshiba, which is at least as big time as Samsung. Those who believe that the competition between Samsung and SanDisk for the major share of the market could result in pressures on profit margins are probably correct. The real question is not whether, but when. Art