Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Tower Semiconductor -- Ignore unavailable to you. Want to Upgrade?

To: Omer Shvili who wrote (540)	12/2/1997 11:37:00 PM
From: virgil vancleave	Read Replies (2) \| Respond to of 1853

just thought i would post part of a larger article that may pertain to tower. not sure if it does, but i do know they work closely with national semi and still do alot of business with them. Still, all is not negative in the chip sector. One pocket of strength should be companies that make analog chips, or those that process real-world signals (like temperature, pressure and sound) instead of just binary codes . Analog chip makers are relatively safe because their products are not in PCs, says Peck. Three firms in this area that he likes are Analog Devices (NYSE: ADI), National Semiconductor (NYSE: NSM) and Linear Technology (NASDAQ: LLTC). But even these stocks will run into trouble if the problems in Asia get much worse and a serious economic slowdown occurs, which would cut into demand, Peck warns. hope this helps. could be part of why tsemf showed a little strength and held its own today while some others got hammered.

To: Omer Shvili who wrote (540)	12/3/1997 4:51:00 PM
From: John Spaid	Read Replies (1) \| Respond to of 1853

I disagree with most of the pessimissim recently expressed about Tower especially with the lack of further information for the following reasons: I've been through several up's and down's in semiconductors and this one is no where near as problematic as the 1996 correction. The analysts have consistently underestimated Tower's earnings. Look back at Neff's estimates as late as April 1997. He thought Tower would earn only $0.53 for the year. Tower's earnings are much less susceptible to margin squeaze then other firms. You should remember they have about $100 million in fixed assets that they depreciate at about $17 million a year. In 1996, sales fell below $20 million. Tower continued to be profitable partially due to large layoffs. I don't expect to see anywhere near that kind of softness in the 4th quarter or 1998 quarter sales. What are the fixed cash costs that everyone is concerned about? The folks who are really pressed are the .35 micron fabs who are finding that supply is ahead of demand for the technology and they're working off multi-billion dollar investments (source DataQuest). For example, TSMC's 1997 revenues are approximately $1.5 billion. They have 2 6", 3 8" fabs with a fourth 8" fab under construction, and a US joint venture called Wafer Tech. I haven't seen their balance sheet, but my guess is they are well above $5 billion in fixed asset investment. They also have borrowed substantially to construct their fabs. So, for TSMC, the wafer supply and foreign currency problem is having a double edge affect on their operations. If they book orders in Taiwan dollars, then they're receiving a temporary advantage in price, but the cost is higher interest rates and less buying power for their expansion programs. My guess is they try to avoid Taiwan dollar arrangements as much as they can. Because ramping semiconductors to high yield volume production is still a difficult process, and the majority of Tower's customers are only now beginning to ramp .35 micron products in logic and mixed signal, I don't see the pressure beyond 1st quarter 1998. I also expect to see Tower move into .35 micron processes in its existing fab next year under its existing 34% Investment Grant program. I also believe that Tower has a strong partnering relationship with their existing customers that will continue to allow them to be profitable.