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

To: Sarmad Y. Hermiz who wrote (11624)	10/3/2004 3:07:03 PM
From: Cary Salsberg	Read Replies (2) \| Respond to of 25522

RE: "...a lower equip-sales/chip-sales ratio." The historical ratio is rooted in behavior that produced semi cycles during periods of economic expansion. The industry is working to avoid those cycles and their efforts will naturally lead to a lower ratio. 1. Equipment is brought online in smaller increments. This allows more efficient ramps and use and lowers the ratio. 2. Capacity utilization has been kept higher than historical levels. Higher utilization lowers the ratio. 3. If cycles are avoided, ASPs are more stable and result in more revenue from the same unit output. This lowers the ratio. 4. Newer equipment is more expensive, but it is also more productive and productivity/cost ratio is rising. This lowers the ratio. The equip sales/chip sales ratio must be looked at along with the profitability on these sales. I think the lower ratio will come with higher profitability for both equipment and chip producers.