Silicon Investor (SI) -- The First Internet Community

STOCKTALK

We've detected that you're using an ad content blocking browser plug-in or feature. Ads provide a critical source of revenue to the continued operation of Silicon Investor. We ask that you disable ad blocking while on Silicon Investor in the best interests of our community. If you are not using an ad blocker but are still receiving this message, make sure your browser's tracking protection is set to the 'standard' level.

Technology Stocks : Semi-Equips - Buy when BLOOD is running in the streets! -- Ignore unavailable to you. Want to Upgrade?

To: Clarksterh who wrote (5702)	6/5/1998 10:22:00 AM
From: Mason Barge	Read Replies (2) \| Respond to of 10921

I can see at least some indirect benefit to the cutback in DRAM production -- here's how my thinking goes. The problem with equipment sales for 256mb fabs (as an example) is not how much they need the equipment, but simply a question of whether they can find, beg, borrow or steal enough money to pay for it. If DRAM prices came back enough for the fabs to make a profit, they would have more funds. Also, they might even purchase some minor to moderate yield upgrades for the current generation of chips (such as 64mb fabs), if the prices are sufficiently high that it makes economic sense to capitalize some production efficiency. In other words, capital expenditures for yield don't make much sense if you're increasing your margin from -5% to -1%. So it's at least conceivable that a DRAM shop with 10MM capacity would cut output to 5MM and buy some upgrade equipment. I'd agree with you on the larger, direct affect, though. But the importance of customers' financial considerations to the revenues of semi equipment co's has been greatly highlighted in the past six months, so there might well be some indirect benefit here.

To: Clarksterh who wrote (5702)	6/6/1998 1:37:00 AM
From: shane forbes	Read Replies (2) \| Respond to of 10921

(DRAM driver for now, better cash flow helps DRAM companies) Clark: RE: In order for DRAM companies to order lots of new equipment from AMAT they need not only to have a recovery in prices, but also a shortage of capacity. First you need money to order the new equip. These companie have been bleeding money for quite some time now. So if they can reduce output by say 10%, because of the current demand for memory, they may get say 30% increases in prices. This means better cash flow. They can then use some of this cash to upgrade some facilities that badly need upgrading. Longer term without a doubt the capacity needs to come down and demand must continue to be strong... Re: I don't necessarily think that the AMAT recovery is predicated on a memory price stabilization. Although several years ago they were more than 50% of the semi-equ market, they are now down to 25% (ref: last Lam and Mattson conference calls). Part of the reason why it is 25% is because they overbuilt last year and they do not need the capacity right now and can't afford it anyway even if they needed it! Interestingly DRAM is down to something like 10-15% of total chip output these days - about 17b. out of around 140b. total (roughly). So even at 25%, DRAM is quite an expensive little baby as far as equipment is concerned. I think the essence of it is that DRAM uses leading edge equip and with the exponential price curves of equipment, a relatively small reduction in DRAM equip ordering has a disproportionate effect on semi-equip revenues. Besides the semi-equips like AMAT attribute their problems at least partly to DRAM pricing. But as I've said before over time Logic will be the leading edge driver - I think the SIA forecast shows Logic overtaking DRAM re: line widths over the coming years - then though DRAM will be important it no longer will be crucial... shane.