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: Ramsey Su who wrote (6715)	8/18/1998 11:12:00 AM
From: Michael Sphar	Read Replies (1) \| Respond to of 10921

Good questions Ramsey. I like to phrase it this way, Why should a PC cost more than a TV ? I didn't quite follow your logic concerning memory pricing, fab shutdowns and demand: "Memory prices, as we all know here, are due to cut backs and total shut down of fabs to artificially reduce demand." I think you were saying that pricing should stabilize as some supply has been eliminated by some fab shutdowns assuming aggregate demand remains constant or increases. To this I'd say little supply as a total percentage has been eliminated yet and mainly on the obsoleting end of the technology curve. A quick look at Korean DRAM debt may help crystalize what the Koreans might do short term. Hyundai is reported to owe $8.4 billion as of Jun 30, which has doubled in dollar terms the past six months due to won/dollar float. This being 930% of company equity. LG Semicon current debt is $3 billion and 500% of equity as of 6/30. As of 12/31/97 Samsung had $5 billion in long term loans and $1 billion in short term loans, these being mainly with local banks and government agencies. With these vast debts to service, the Koreans have little choice but to cut spending for future growth and ship like crazy to grab every available memory dollar in addition to relying on labyrinthine economic support structures of the chaebols. Memory supply in the foreseeable future will remain abundant and cheap.

To: Ramsey Su who wrote (6715)	8/18/1998 1:28:00 PM
From: Mason Barge	Respond to of 10921

I am not qualified to answer all of your questions, but I do have two comments: <<INTC parts, are reported to be in limited supply so the prices should be stable.>> This is only true of higher-end machines. PII 266 and 300 are in short supply, and faster chips are proprietary. Anything slower is, the best I can tell, under intense price pressure due to AMD/Cyrix-Nat'l/IDT. <<Wouldn't all of the above start putting the squeeze on the boxmakers', who had been benefiting from dropping component prices?>> I think this is starting to happen right now. There's going to be some shakeout. There was a great article on Solectron in the WSJ this morning, and I think boxmakers are eventually going to face a transition involving razor-thin margins, where only those with excellent cost management and production-distribution modelling will prosper. If the Japanese and Koreans weren't in such dismal financial straights, we might have started to see a shift to their boxes. Personally, I think the first to fall will be those with less than excellent product reputations. Myself, I wouldn't buy a Packard Bell, AST or Acer under any circumstances, and my experience with Compaq will also lead me to look elsewhere the next time I buy.