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To: Artslaw who wrote (1617)	4/21/1998 10:33:00 PM
From: Ian@SI	Respond to of 2946

Following article contains 1 reason to feel rosy about SVGI... CAPITAL Sizzling Intel saves gear maker's bacon Their Asian markets have been pummelled and the shift to 300 mm wafers continues to lag, but semiconductor equipment suppliers are being reprieved by an unexpected trend: the acceleration by chip makers of new generations of process technology. Intel Corp., Santa Clara, has led the drive with an aggressive push to convert its factories to 0.25-micron technology. A company spokesman says half of the firm's capacity will use that technology before the end of the year, but that may be an un-derstatement; analyst G. Dan Hutcheson thinks it may soon hit 70%. "That's phenomenal given that most of the world is under 10%," says the president of VLSI Research Inc., San Jose. By knocking six months or more off normal transition times, Intel's pace is spurring other large semiconductor makers to keep up, reversing the long-established trend that memory chips, not logic chips, drive process technology. "Intel puts pressure on everybody to ante up or get left behind," says Bill McClean, president of IC Insights Inc., Scottsdale, AZ. The trend is important to beleaguered equipment vendors because about 25% of installed chip gear must be replaced when a new process is adopted. While faster process shifts put pressure on new product development, companies like Silicon Valley Group (SVG) aren't complaining. For SVG, a supplier of deep ultra violet lithography equipment to Intel and others, the trend is helping offset business lost because of the economic slump in Asia, says John Shamaly, vice president of marketing for the San Jose firm. Continuing the pace, Intel expects to see 0.18-micron technology running in development fabs by next year, and will probably ramp it into widespread production in 2000 or 2001, the spokesman says. Other firms are also being aggressive. Japanese giant NEC Corp., for example, plans to begin migrating its application-specific integrated circuit (ASIC) designs into 0.18 micron this year, says Ray Newstead, general manager at its Santa Clara facility. --Robert Ristelhueber

To: Artslaw who wrote (1617)	4/22/1998 1:24:00 PM
From: David Aegis	Read Replies (1) \| Respond to of 2946

Steve-- IMHO, SVGI has tons of cash, decent products, and significant operating leverage heading into the next up cycle. All of the bad news you list is, I think, already in the price of the stock. In contrast, none of the upside is priced in. SVGI earned over $2 per share in FY 1996 when there was next to no profit contribution from the lithography division. I have recently completed plant visits at the Track and Thermco divisions, and I think the new products in these divisions position them even more favorably than in FY1996. Profit from Micrascan sales will be icing on the cake. Intel, another stock I own, had an upbeat analyst meeting in NYC yesterday. I think that as Intle gets a better feel for the level of box builder demand for the Celeron and P-II chips and related motherboard chip sets, they will start buying equipment again. They will need to buy Micrascans to achieve their roadmap to .25 u and .18 u line widths. They will probably also buy some 200 APS's. A lot of suppositions on my part, huh? But I find a lot more compelling reasons to own SVGI at 20 and change than the broader market at 25 times forward earnings on the S&P 500. --David