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To: mike iles who wrote (33632)	5/18/1998 11:09:00 AM
From: DavidG	Read Replies (2) \| Respond to of 53903

Mike, It is interesting how you say 16mb is below $1.50 which equates to $6 for a 64mb crossover and you choose the $8 price quote from possibly some troubled Skorean fab that is forced to dump inventory to raise $$$. Now I am not saying 64mb chips aren't plunging, but your numbers just do not add up to crossover no matter how you hack at it with your trusty calculator.:-) Mike crossover is NOT the big issue anymore. DavidG

To: mike iles who wrote (33632)	5/19/1998 1:18:00 AM
From: Ed Beers	Read Replies (2) \| Respond to of 53903

Mike, if I recall correctly, during the last conference call, MU indicated that they were not expecting to achieve significant cost reductions on the 16Mbit going forward. This quarters prices look significantly below last quarters. We have every reason to expect that they will take a bath on 16Mbit parts. I expect that at least 50% of the bits they ship (we will just ignore work in progress) this quarter are 16Mbit parts. 64Mbit parts are a wild card. They could be manufactured significantly cheaper on a per bit basis and appear to be selling for a modest premium per bit. Their basic die size is about 30% smaller per bit, packaging cost should be 75% less per bit, and testing should be less per bit. Now if we could only get a handle on their yields.... If everyone transitions to 64Mbit parts (and they will), total capacity will increase significantly. Demand may not be strong but it is still elastic so these parts will all sell at some price.... There is no question that MU has performed poorly when managing their test and assembly capacity. First they lost sales when they had too little capacity for a rapid ramp in 16Mbit unit volume. Then they failed to anticipate an early crossover to 64Mbit (with a 4 to 1 reduction in unit volume) and over built. Timing these changes is not an easy task and some of their competitors may have had just as much trouble in this area but not gone public. The transition to SDRAM obsoleted a great deal of equipment and lead times for testers got really long for everyone. I assume, that after being publicly burned, they will give this area more attention in the future. I do kind of wonder why the Koreans would build fabs in this country. The only really compelling reason I see is that market forces might force them to sell below "dumping" levels during the life of the fab. Not a very encouraging thought for MU. I think that MU's manufacturing people have really delivered the goods over the last couple of years. I also think that most of MU's stockholders have unrealistic expectations given the current capacity and pricing environment. However, if last quarter didn't change their mind, why should this quarter? I have had a good handle on fundamentals for the last year or two and I haven't made a dime on it yet. Larry might have the best way to play this game but I am too afraid of getting whacked for a $20/share loss just for being long for the wrong hour. Ed