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

To: Art Bechhoefer who wrote (25364)	3/16/2004 7:41:41 AM
From: Pam	Read Replies (3) \| Respond to of 60323

Art, Toshiba and Sandisk are still discussing the plans for Fab 3. Eventually, they will build it but the feeling I am getting is they are carefully evaluating the supply situation, and of course the demand too for that matter, and not rushing into it. This is from their 10-K: "We and Toshiba would share equally in the investment, and we may need to raise additional capital for our portion of the investment." Also, "In addition we have not yet, and may never, enter into definitive agreements with Toshiba with respect to the construction and operation of Fab 3 and even if we do not do so, we may remain obligated to reimburse Toshiba for 50% of the cancellation fees described above, which would be substantial." Again, its possible we are reading too much into it. Companies layout all the risks in 10-K to protect themselves. In terms of generating cashflows from operations, Sandisk did a good job last year and probably will repeat it this year but it could get tough in 2005 if there is too much supply. The cost of Fab 3 is estimated at 2.6B and Sandisk's share will be half of that which means all that they have can go away in the next couple of years. Also don't forget they have loaned over 150mm to FV this year to fund additional 200mm wafer supply. Ultimately, the bottomline is how much NAND chips can come from new players as well as existing players and whether demand can match that increase! As they move to 90nm and 70nm, the capacity increases manifold and the incremental costs to move from 110nm to 90nm to 70nm is not that high. It's like doing miniature paintings on a 200mm or 300mm wafers. The finer the brush you have, the more the number of paintings you can make! If Sandisk/Toshiba can stay ahead of the Koreans and Chinese in terms of moving to finer geometries, Sandisk will do just fine as they can compete with anyone being a low-cost producer and vertically integerated. But for now, my understanding is Samsung is already ahead as they are producing small portion of their supply using 110nm whereas Sandisk will start sometime later in June. -Pam