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

To: Dave who wrote (27090)	12/6/2004 10:45:23 AM
From: Art Bechhoefer	Respond to of 60323

Dave, ordinarily one could assume that prices of goods made in Japan would be higher in dollars, owing to the increasing value of the yen against the dollar. But this doesn't necessarily translate into higher prices in the case of SanDisk's Japanese fab because a substantial portion of the capital investment in that fab was made when the yen had a lower value, and the variable costs (mainly labor) are comparatively low in highly automated manufacturing operations. In fact, to the extent that raw materials or equipment are imported into Japan in order to make the flash chips, the costs of those items in Japanese yen are lower, but they remain about the same in dollar terms. Japanese made cars and other products that involve a fair amount of labor and handling costs would be more costly in dollars. Another issue to consider is the cost of energy embedded in a particular product. To the extent that oil products are involved in the manufacture of flash chips (or in running the factories making the chips), these costs would remain fairly constant in yen as the yen appreciates in price, but would increase in dollars or in countries with currency pegged to the dollar. The end result is that Japan is still a pretty good location for high tech manufacturing, especially where the process is highly automated. Along with that, the Japanese economy is still struggling with higher than normal unemployment and virtually no growth in gross domestic product. This condition removes inflationary pressures, particularly on labor costs and keeps Japanese manufacturing competitive. Art