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To: TREND1 who wrote (36467)	7/24/1998 12:59:00 PM
From: Teri Skogerboe	Respond to of 53903

Larry, All, Over on the AMAT thread, we have had an on-going discussion about the effect shrinks (.50 um to .35 um to .25 um, etc.) have on capacity. I clipped this from IDTI's recent earnings release (just yesterday, I believe). Excerpt: "Like many of the companies in our industry, our first quarter operating performance was disappointing," said Len Perham, president and chief executive officer. "The global slowdown in the semiconductor industry, the continuing economic crisis in Asia, and continued oversupply conditions, have created a very difficult market environment. The proliferation of Far Eastern foundries, coupled with the 'hidden capacity' increases associated with the rapid move from .6- to .5- to .2-micron manufacturing processes, has resulted in capacity increases far in excess of what the industry can absorb in the near term." Lehman Bros. is recommending that everyone buy AMAT et al because, in part, the DRAM supply/demand imbalance is getting better and better. They are citing 4-9% excess capacity for '99, down from much higher levels. Well, I find that very hard to believe, in part, because the shrinkages continue to increase capacity. I was hoping to get some opinions from you guys over here as to whether the Lehman argument makes sense to you. Thanks, Teri Edited... This is link to the Lehman AMAT report (and it does relate to MU, as well). exchange2000.com Excerpt: "5. The Best News Applied was frank in discussing the bleak near-term climate. It should get discounted quickly. Dram excess capacity trend was 11% in 1995, 30% in 1996, 25% in 1997, 11% in 1998, 4-9% in 1999 still an excess but getting better. There is very substantial room for cost reduction." So, do you guys buy their theory that excess capacity is getting less and less?? Right this second, I don't... but looking for other views.