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Technology Stocks : SILICON STORAGE SSTI Flash Mem -- Ignore unavailable to you. Want to Upgrade?

To: Kenneth R. Moss who wrote (169)	5/28/1998 4:01:00 PM
From: Smilodon	Read Replies (1) \| Respond to of 1881

Notes from company visit. (A bit unorganized) The company used a lot of cash in Q1 to build inventories. They did this because they could get a 20-30% discount on wafers in Q1 due to Chinese New Year. They also wanted to preserve capacity for new products in later quarters (especially Q4). Pricing of Flash is very competitive. Atmel seems to be willing to cut prices to build or maintain market share. They have made several changes to the management team, and are especially excited about adding Mike Briner. Mike helped to build AMD's flash business and was hired by Micron to help start their flash business. When MU merged their flash group back in to the overall corporate structure, SST was able to hire him. He is now head of design at SST. Apparently, he is a very respected player in the flash industry. SST has improved its transition to smaller line widths through new foundry deals. Whereas their old supplier, Sanyo, only transitioned from 1 to .7 micron since 1993, TSMC did a quick shrink to .5 micron and should be at .35 micron in 2H 98. They expect that by year 2000, SST will have as small a line widths as anyone in the industry. At similar line widths, SST has a cost advantage as it has a simple manufacturing process and is easy to design. Last month, 50% of products were at .7 micron, this month 70% will be at .5 micron. All .7 micron will be phased out by year end, and some .35 micron will be shipping. The current pricing environment is very price sensitive. The original SuperFlash product offered the functionality of EEPROM (ex. very reliable, very durable, small erase blocks) at the price of flash. However, customers are often not willing to pay for the extra functionality of SuperFlash. So, they are introducing new products with limited functionality and low cost. The difference is the amount of control circuitry. Less control circuits = smaller die size = lower cost. SST has rapidly ramped up product development. They will introduce 6 new products this year, and 20 next year. CompactFlash (digital camera film) will ship in July. They are already shipping memory for the PalmPilot clone. Their first embedded controller product will ship in Q3. They hope the Flash cycle turns up in late 98 or early 99 but are very uncertain. Have added sales capacity to improve sales to US and Europe. They were capacity constrained in 2h97, but have plenty of capacity now with their new foundry partners. Overall, I was very impressed. This is a cyclical business and SST is getting hurt along with everyone else. But, they seem to be responding well and doing a good job of positioning for the future. Time will tell, Archer