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Technology Stocks : THREE FIVE SYSTEM (TFS) - up from here? -- Ignore unavailable to you. Want to Upgrade?

To: k.p. chen who wrote (1547)	5/29/1998 6:35:00 PM
From: Noblesse Oblige	Read Replies (1) \| Respond to of 3247

K P Chen notes: ...The dependence on MOT is a big problem, as we all know the big mess at MOT. TFS's venture into China is to accomondate MOT's business there, and it carries huge risk that the company may have not realized. I will personally check TFS's site there this summer when I travel over there. MOT is a big loser, misstepeed so many times, and now don't know what to do with their business. __________________________________________________________________ I am not sure that MOT's problems are monumentally relevant to us in the long term. The company, whatever its shortcomings, still retains the largest portion of the cellular handset market, with nearly 35%-37% of total volume accruing to its revenue line. Contrary to KP, I see the TFS move to open a China facility as multi-faceted, with a variety of reasons in place: 1) geographic diversification from the Philippines, 2) less expensive production costs for labor and facilities, 3) a rapidly growing domestic market, with companies having a presence in China developing the largest incremental portion of the business opportunities, 4) proximity to other cellphone manufacturers, 5) developing price competition for Philippine labor, which will benefit TFS when the labor contract comes for renewal next year. So, this isn't simply a case of wanting to be accommodative to Motorola. Matter of fact, though MOT is clearly TFS's major customer, as I have highlighted before it would be myopic to think that TFS will not be getting business from other cellphone manufacturers, particularly now that MOT has its own ongoing developments with Kopin. Yep...MOT isn't the company it used to be. For our purposes, however, I don't really see why that is relevant beyond the current quarter. In time, we will have further diversification, particularly as the National Semi partnership bears fruit. (BTW, as Michael Dodge has pointed out, one of NSM's representatives gave a speech at the recent SID Conference where he indicated that the partnership would have cellphone and a projection customers by the end of this year, most probably with a revenue contribution starting in 1999.) Have a good weekend all.