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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: davesd who wrote (13721)	12/21/1997 3:29:00 PM
From: Ian@SI	Read Replies (2) \| Respond to of 70976

Dave, Currently chips are selling at a loss... "Currently", in the DRAM business, changes every 5 minutes. In any case, the blanket statement is not true. 16Mb chips may have sold at a loss on the spot market compared to what it would cost MU to make the same chip using the same process at this time. But none of those factors apply to a Korean fab which bought the materials months ago in Won that have now deflated substantially relative to the US $, etc. Further, # of bits coming from 16Mb and smaller chips has been declining. # of Bits coming from 64Mb chips has been growing rapidly. Prices for 64Mb chips do not result in a loss on current expenses (depending upon the life for this chip, capital costs may not be fully recovered before the equipment becomes obsolete). In any case, by the time a story is in print, the facts have changed. This has been the story for DRAM for decades. ... and will probably remain the case for decades. Plus the recent IMF report seems very bearish for growth...Chip demand could drop from the 1998 projections. Yes, it could drop, stay the same or rise from the projections. Based upon the past, odds are that it will rise from projections - especially when those projections are bearish to start with. Ian.

To: davesd who wrote (13721)	12/21/1997 3:59:00 PM
From: Steve Robinett	Read Replies (3) \| Respond to of 70976

Dave, Let me keep it simple--yield. If two farmers produce 10 potatoes per acre for an hour's work and can sell those potatoes for more than it cost to produce them, they're happy. If one of the farmers buys a machine that lets him produce 15 potatoes per acre for an hour's work, he can spread the cost of the machine over many seasons and sell his potatoes cheaper and still realize the same profit (increased productivity). The other farmer has two choices, increase his yield to compete or go out of business because his potatoes cost too much. Chip makers are in the same position, increase yield or price themselves out of the market, an existential dilemma they'll resolve, IMO, by finding money for equipment. Best -Steve