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Pastimes : Ask Mohan about the Market -- Ignore unavailable to you. Want to Upgrade?

To: HammerHead who wrote (8364)	11/17/1997 9:46:00 PM
From: Zeev Hed	Read Replies (2) \| Respond to of 18056

Robert: Part of MU problems are the south Korean "dumping" of DRAM and SDRAM etc. Their costs (due to devaluation) are going to be even lower putting more pressure on the US commodity products producers, this is the short term. Longer term, some of them will be closed and written off, IMHO. Samsung is already getting into major financial problems and their borrowing costs are said to escalte, GS supposedly is not much better off. It seems that there is a poker game going and everyone is watching who is going to fold first (and take some overcapacity off line), no one wants to be the first one to blink. Until now the S. Korean government had as a strategic mission to become a dominant factor in the semis (just as they had some 15 to 20 years ago the same mission in steel, ship building and cars, and the fiefdoms built on this government wisdom are now in bankrupcy), I think that their appetite (as well as financial ability) to come to the rescue here will be as strong as it was for the last seven major conglomerates that folded or went into CH 11. Like any defaltionary cycle, asset write off is the purging mechanism. This will put extremely heavy pressure on the semi equipment sector in particular, and could endanger MU (TI is too diversified and has too much cash flow from royalties to be worried about survival), but I think MU will survive the through and rally powerfully sometime next summer, once some of the Korean capacity is taken off line. The semi equipment provider will not have the massive investment they had seen in the last few years, and there the technology transitions (such as move to .25 microns, larger waffer etc.) will provide some interim feed, but at much lower level than the massive production equipment shipped in the last few years. The good (which I consider VECO, CYMI and few other and of course the leader AMAT) will be thrown down the slippery bear market curve with the bad (who are already there). Just my two cents, and I am sorry for the long answer for such a short question. As for other semi, some should actually benefit, like the fabless companies will have a choice of assets to either actually buy or get under very beneficial long term contracts. This will be balanced by a decline in general demand fro chips, but this will not be a major problems (maybe a quarter or two of slightly negative q over q growth). Stiil, the market is currently still pricing many companies in the sector as if the recent growth rate of 17 to 20% will be eternal. So the stocvk will suffer when reality dawns. Zeev