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Technology Stocks : Semiconductor Industry Sales Trends -- Ignore unavailable to you. Want to Upgrade?

To: stockaholic who wrote (7)	5/15/1998 12:52:00 AM
From: cbstock	Respond to of 105

Thanks for taking the time for the excellent answer. You obviously have an excellent grasp on the issues to the extent that anyone does. Here is a posting that Dan McCraine, the VP of Marketing and Investor relations just posted to me on the Cypress.com home page. It makes for interesting reading and sort of says the same thing but from the perspective of a Corp officer..Dan calls it a recession but it is really a depression in semis and a very difficult bear market.. Looks like for 2-3years in the future because of all the capacity available. cypress.com Time: Thu May 14 19:38:52 1998 -------------------------------------------------------------------------------- Mr. Sir Thanks for your inputs. 1) This 'recession' has been very different than the ones in 1990, 1986, 1980,1974 and 1970 (Yep, they even had semiconductors back in 1970). In all of those years I mentioned, there were predominant DEMAND issues. In other words, the industry had build more than enough capacity and then end user demand collapsed, leaving empty fabs. In each case, a new 'killer application' had to be developed before the industry would revive. This time it's different. Demand has stayed robust throughout the entire two + year recession. The problem has been extraordinary capacity, forcing prices very low. As an example, we saw our pricing for one particular SRAM (256K) move from $4.00 to $0.90 in six months! Micron, Samsung and other DRAM suppliers saw their prices drop equally....even though end market demand remained strong. So, we are looking at two distinct items when we attempt to forecast the 'industry turnaround': Semiconductor Capital Equipment purchases and end market unit demand. End market unit demand will, we believe, remain robust for the next decade, driven by three 'killer applications': Personal computers, Wireless communications, and the Internet. Semiconductor Capital Equipment Purchases have been in excess of 'normal' demand for over three years, even though capital equipment purchases declined by about 7% last year. This year, the industry is projecting a further 15% reduction. If that happens, we could see supply/demand balance sometime in late 1999. So, all of this means that we will continue to have a rough year in 1998 (5% - 6% growth) and a rough first half of 1999. BUT, supply/demand laws should come into play positively for our industry by the second half of 1999, thereby stabilizing prices. Whew. I hope that's clear, . . Re-reading it, I think I've confused myself. 2) I think that it is virtually impossible to have $300Billion revenue in 2002...just based on a weak growth rate for 1998 and only a moderate growth rate for 1999. Our internal numbers are more like $220 - $240 Billion by then. That growth rate, however, should be more than enough for Cypress to start driving some revenue and earnings numbers that we all can (finally) be proud of. 3) We look a minimum of five years out for strategic purposes, concentrating on our target markets (Communications and Computers) and trying to understand our customers product road maps, growth rate and how we can best support them. 4) Each new product is examined on almost a monthly basis during it's development stage, and then quarterly afterward...until about the third year. The purpose of the scrutiny is to understand whether or not we've deployed our technical and sales resources on a winner, a dog, or a loser. 5) Relative to overall product mix, we scrutinize formally every planning cycle, which occurs in Q4. The last planning cycle, for example, showed that we didn't believe that we should continue to invest in two product areas: PC Chip Sets and Commerial UVEPROM (reprogrammable memories). Accordingly, we exited both markets and redeployed our resources to USB, Micropower SRAMs. Dan