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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Ramsey Su who wrote (22364)	8/1/1998 10:29:00 AM
From: P.M.Freedman	Respond to of 70976

The weaker yen will lead the recent recovery of semi sector from Asian flu to hopeless. I believe that some institution holders created an exit last week to unload their shares last week. AMAT may see a double bottom before it really going north. Good luck to all!

To: Ramsey Su who wrote (22364)	8/1/1998 1:40:00 PM
From: John L.	Read Replies (3) \| Respond to of 70976

I think that Siemens feels that the over supply of memory is not going away soon and they are not prepared to continue to lose money in memory production. The really troubleing thing to me is this was a fab that was recently upgraded to do 64M chips and they can not turn a profit on these chips. The Asian companies are churning out product at a loss is what I interpret from Siemens move to close this fab. No smart banker is going to loan companies money to buy new equipment when there business plan is producing losses so I don't think the Koreans are able to make upgrade purchases. Japan has so many problems that they seem unlikely to step up to the equipment purchasing plate anytime soon so 6-12 months for a recovery is starting to seem optimistic. After tasteing memory prices this cheap I don't think the profits in this segment will ever be as high as they once were, we need some new killer apps to spur demand.

To: Ramsey Su who wrote (22364)	8/1/1998 2:50:00 PM
From: Katherine Derbyshire	Read Replies (2) \| Respond to of 70976

>>Instead, Siemens chooses to throw in the towel also. Could someone in the business explain the merits of this strategy, other than a total defensive move motivated by necessity? << I'd call it a defensive move motivated by necessity. Over the last few years, Siemens' investments as a percentage of chip revenue have been very high, approaching the 100%+ range of some of the Koreans. That has made them similarly vulnerable to the DRAM collapse. If they're actually closing a fab, rather than selling it or converting it to another product, then they have a very grim long term view of their and/or the industry's prospects. Katherine

To: Ramsey Su who wrote (22364)	8/1/1998 3:09:00 PM
From: Jacob Snyder	Respond to of 70976

Ramsey: re: why did Siemens throw in the towel? I'm not in the industry, but I think I understand demand/supply dynamics. Anyone more knowledgable (sp.?), please correct this sequence: 1. Optimism and national pride cause too many fabs to be built. 2. Demand, although growing, lags supply. 3. prices go into freefall, until 4. they stabilize at a price where no one is making money. 5. The initial response is to become more efficient by die-shrinks. Unfortunately, because of the nature of the business, increasing efficiency (if the number of fabs stays constant) means a huge additional increase in capacity. This is what MU is doing. 6. The next response is to get out of the business, and sell your fab. You may have to sweeten the pot a bit. This is what TXN did. 7. Finally, conditions get so bad that the market value of a fab is zero. You can't sell it; you don't want to keep on operating it; you can't think of anything useful to convert it to. No options left. Close it down and walk away. This is what Siemens just did. I predict more similar announcements the rest of this year. Separating the wheat from the chaff has just begun. Over the next 18 months, the DRAM industry is going to stop losing money making 16mb @ 0.35 micron, and start losing money making 64mb @ 0.22 micron. The survivors will make money (maybe a lot) with 256mb. Maybe a year ago, someone would have wanted to buy the Korean fabs. Today, I don't think there are any buyers. Korea is SOL.