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To: Mason Barge who wrote (4332)	1/7/1998 12:47:00 AM
From: Alan Gallaspy	Respond to of 10921

Mason: You were wondering Concentrating on the ultimate efficiencies available from any type of capital outlay must always be tempered by the hard fact of business: where's the money coming from? A lot of people still don't seem to realize that the Koreans, and to a lesser degree other Asian semicondutor economies, simply cannot pay for as much new equipment as they could effectively capitalize. Nobody will lend them the money and they are categorically overindebted as it is. OK, so the Koreans will have to scale back or consolidate or abandon the business or whatever. Some of the Japanese weak sisters have dropped out and the big Japanese companies have stated that they will cut back on DRAM cap-equip expenditures. Apparently at least some people see this as an opportunity, namely the head of the largest Taiwese chip company, Morris Chang of TSMC. Check out techweb.com Exerpt: Put on a happy face: At an anniversary celebration for 10-year-old foundry Taiwan Semiconductor Manufacturing Co. Ltd. (TSMC), chairman Morris Chang wouldn't rule out an oversupply of foundry capacity and a further downturn in the IC industry over the next five years-but said he's expanding anyway. TSMC is adding to its five fabs with an 8-incher in Camas, Wash., where it has enough land for three more fabs. Chang said he was "considering keeping a deliberate reserve capacity" to prevent turning away customers when capacity fills up, but that may have been his media spin. The market climate has seen TSMC running under capacity for most of this year, and declining chip prices dropped its profit margin to 39 percent for the first nine months of 1997, compared with 50 percent for the same period in 1996. Nevertheless, TSMC garnered $400 million in profits the first nine months of 1997 and could self-fund an 8-inch fab on cash flow alone, according to analysts. So what I am getting out of this is that there is still money to be made in the hyper-competitive chip markets and the people that run these companies have a good idea of how to make it, this year and next.