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

To: Proud_Infidel who wrote (23023)	8/15/1998 9:55:00 AM
From: Proud_Infidel	Read Replies (1) \| Respond to of 70976

Low-End Pentium II Shortage May Last Through 3Q (4:00 p.m. EDT, 8/13/98) By Mark Hachman A shortage of low-end Pentium II microprocessors that has prompted an uptick in chip prices may last until late in the third quarter, an Intel Corp. spokesman said. Rumors floating about Wall Street this week said that Intel was itself experiencing production problems, a charge analysts and a company spokesman said was not true. But analysts also cautioned that the rise in prices did not signal a corresponding rise in demand. The shortage, resulting from Intel's shift to a finer manufacturing process, has caused spot prices to rise on 233, 266 and 300 MHz Pentium II microprocessors over the past weeks, according to chip brokers and distributors. At press time, Aliso Viejo, Calif.-based broker American IC Exchange noted at least 29%, 37%, and 26% premiums, respectively, over Intel's fixed prices. "Intel really flipped the switch on the 333 and 350 MHz Pentium II's," said Greg Gammon, vice-president of sales for Gates-Arrow Distributing Inc., Greenville, S.C., the PC arm of distributor Arrow Electronics Inc. "We're trying to get all the 266 (MHz chips) we can get our hands on." Those chips are manufactured upon Intel's 0.35-micron manufacturing process, producing some shortages as Intel swaps that production equipment in favor of new 0.25-micron lines, a spokesman for Santa Clara, Calif.-based Intel said. And as the PC industry begins manufacturing its back-to-school models, the Intel spokesman warned buyers to start doing their own homework again. "In the last few quarters it's been a case of `here's the cash, now give me the processor'," he said. "Now, our customers are asking for the processors again. But this time, we're telling them they should have forecast better." The Intel spokesman added that he "wouldn't even begin to consider" placing PC makers on allocation. But he did say that low-end Pentium II buyers would have to shift away from a "turns"-based model, - where orders are booked and billed in the same quarter- back to forecasting their demand over a longer period of time. As a result of this transition, he said, buying conditions should become more stable late in the third quarter. Top-tier PC OEMs like Compaq Computer Corp. and distributors are finishing up concentrated efforts to reduce their own inventories to avoid expensive writedowns. That trend, combined with uncertainty in Asia and other unknown market forces, "means the time is ripe for temporary screwups," said analyst A.A. "Tad" LaFountain of Needham & Co., New York. The spot market has also recorded shortages in older Pentium MMX microprocessors, a product that Intel is phasing out in favor of the newer Pentium IIs. But Intel purchases the plastic packages for those chips from a third-party manufacturer that has experienced its own supply problems, the spokesman said. Analysts noted that both bulls and bears have used the rising Pentium II prices to justify their predictions concerning the future of the chip industry. But they reminded buyers that any shock waves being felt were simply giant Intel shifting its weight towards faster products. "It's a mix issue, pure and simple," said Scott Randall, analyst at SoundView Financial Group, Stamford, Conn. LaFountain said his impression was that Intel representatives were trying to assure Wall Street that they would be able to make their own production targets. "That's a big difference than reporting an uptick in demand," he said.