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Technology Stocks : Speedfam [SFAM] Lovers Unite ! -- Ignore unavailable to you. Want to Upgrade?

To: Michael Burry who wrote (2720)	2/8/1998 4:59:00 PM
From: Dennis G.	Respond to of 3736

Has AMAT ever stopped spending on R&D? If not, is this a sign they are worried about the "long-term" viability of their products? I think the answer is yes to all the equipment makers. But I don't think it's a sign of weakness for any of them. It's just the nature of the industry. How many chip makers want to be using obsolete equipment? You have to keep running if you want to stay in the race. Why would anyone think that there is an end to innovation? Not to be a flame at anyone but if this kind of industry bothers someone, they probably should just stick to buying soft drink and toothpaste companies (where they endlessly spend on advertising). Dennis

To: Michael Burry who wrote (2720)	2/8/1998 7:10:00 PM
From: Proud_Infidel	Read Replies (1) \| Respond to of 3736

Re? If the industry is very competitive, thereby limiting pricing flexibility at the same time it requires high ongoing capital expenditures (making cash flows negative forever), then where's the value? Competetiveness and value are not mutually exclusive. The high capex required in this industry is simply a ticket to play the game. To win the game, one needs to outdistance its rivals through innovation, year in year out. The winner gets market dominace in fast growing markets and increasing margins. INTC GM's have been at about 60% in an industry requiring huge R&D. You do not see value there? regards, Brian

To: Michael Burry who wrote (2720)	2/8/1998 7:26:00 PM
From: Steve Patterson	Respond to of 3736

Your manufacturing process only runs as fast as the slowest process in it. My impression (though I am not a semi engineer) is that CMP is viewed as an annoyingly low-tech nuisance. You've just etched with all these high-tech lasers and photomasks, done all this wacky CVD, and now you have to run it through a machine which is essentially a bunch of very expensive Brillo pads -- plus it eats lots of slurry and dumps lots of federally-regulated waste out the back. This means that if you have a clearly superior machine, you can charge more than the competition and get away with it (look at SFAM's margins). This is especially true in manufacturing equipment, where the incremental value of processing X more widgets per hour (for instance) translates into X * 150+ hours/week more revenue for the manufacturer. Let's also remember that most semis require multiple CMP steps, so multiply Y steps * X * 150, and any difference at all is magnified greatly. The bad part comes if others' equipment is roughly equal to yours. Then you are in a commodity market, where price and service (which costs you $) are the main decision factors, and your margins go to hell. To avoid this, Speedfam must continue to spend on R&D. Their investment will be a good one as long as they can maintain technical superiority, and therefore reasonable profit margins. If they can only maintain pace with AMAT/IPEC/Ebara, they (and we longs) will be hurt badly. This, incidentally, is my educated guess as to why IPEC never makes a profit. They can keep pace well enough to get INTC's business (and some others), but are not far enough ahead to demand a premium over their own cost of goods. Long, Steve

To: Michael Burry who wrote (2720)	2/8/1998 10:22:00 PM
From: LLCF	Read Replies (1) \| Respond to of 3736

< This is at the heart of my concerns re: when will the R&D and capital investment end, or can it? If the industry is very competitive, thereby limiting pricing flexibility at the same time it requires high ongoing capital expenditures (making cash flows negative forever), then where's the value?> Well forget about your concerns then! How long have the auto makers been spending on R&D??? They will never stop. And who spends the most AND has the best cars?? Mercedes. Its a never ending process, and I'd be more concerned if a company didn't spend it or claimed they didn't have to! DAK