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Technology Stocks : MEMC INT'L. (WFR -NYSE) The Sleeping Giant? -- Ignore unavailable to you. Want to Upgrade?

To: All Mtn Ski who wrote (3713)	8/24/1998 9:42:00 PM
From: Scotsman	Read Replies (1) \| Respond to of 4697

Some people on the Yahoo thread are calling for MEMC to hit 4 dollars a share. At the rate its going, I wouldn't doubt it. However, here is some future news. Note the reference to wafer demand by 2002. Chip Investment Feeling Impact Of Price Pinch With the continuing fall of prices for dynamic random-access memory chips, major Japanese semiconductor companies are starting to squeeze their capital investments, especially at home. Even NEC Corp., the leader in the business and one of the few Japanese companies that made a profit from chips last fiscal year, has joined the trend. NEC's turnabout will set an example for more companies to reconsider their investments, analysts predict. NEC in May was the only major Japanese company to announce that it would keep its chip capital investment for this fiscal year at the same level as in the previous year, 180 billion yen ($1.2 billion). Fujitsu had cut its investment plan by half from fiscal 1997 to 90 billion yen, and Hitachi Ltd. had set its at two-thirds of the previous year at 80 billion yen. When NEC made its May announcement, it expected memory-chip prices to recover in this fiscal year's second half, which starts in October. But that expectation now appears to be too bullish. So NEC now plans to reduce capital spending on chip production by 30 billion yen, to 150 billion yen, this fiscal year. "Our major customers are Japanese manufacturers, and they were hit by the weak domestic consumption and the fall of the Asian economy. They seem to need more time to recover, so we decided to cut some of our investments," said Kyoji Yamamoto, vice president of NEC's semiconductor group. NEC's production of 64-megabit dynamic random-access memory (DRAM) chips is to reach 10 million a month by December, from 8 million now, but output is to be stopped at that level. The company plans to delay by a year to early 2000 the start-up of a plant in Yamagata Prefecture that will produce system-on-a-chip application-specific integrated circuits. NEC is not alone in facing difficulties. "For every company, it is hard to recover the investment in 64M DRAMs at the current low prices," said Yoshiharu Izumi, senior analyst at Warburg Dillon Read. The price of a benchmark 64M DRAM in large transactions was about 1,000 to 1,100 yen in June, compared to about 1,500 yen in March. The price for July was at about the same as the June level, but market analysts hardly expect a rebound. Izumi said the oversupply of DRAMs is calculated at 18% for this year and 8% for 1999. South Korean semiconductor companies stopped production for some weeks in June and July as chip prices fell. Siemens AG of Germany decided in late July to shut down its year-old DRAM plant in the U.K. by the end of September. Holding the line Major Japanese companies besides NEC are holding to their original investment plans. But Naoki Sato, senior analyst at HSBC Securities Japan Ltd., doubts they can continue to do so in the future. "Other companies may also be forced to cut investment. About a 40% cut from the previous year is becoming a consensus. Toshiba is one such candidate," he said. Toshiba now plans to invest 140 billion yen in the current year, down 17.6% year on year. When they are investing, Japanese companies often are looking overseas. NEC is trying to take the lead. "Invest-ment in next-generation chips will depend on the customer's production. We are trying to cooperate with our customers on development of the chips," said Yamamoto of NEC. "As we lead in starting production, that will provide our profit." In June, NEC announced it will invest $1.4 billion over the next four years to build a factory in the U.S. state of California to produce advanced memory chips and logic integrated circuits. The facility is to start mass production in 2002. The plant will be built on a site owned by NEC Electronics Inc., a California-based subsidiary. It is to turn out next-generation 256M DRAMs, 1-gigabit chips and advanced system chips for home-electronics products. The U.S. facility is to have a monthly output capacity equivalent to 20,000 300mm wafers and to be able to etch circuits 0.15 micron wide. NEC also has a project to invest heavily in China. In July 1997, NEC started to build a semiconductor factory in Shanghai with Shanghai Hua Hong Microelectronics Co. with a total investment of $1 billion. About 28.6% of that will be shared by NEC and NEC (China) Co. The plant is scheduled to begin volume production in September 1999, with a capacity of 20,000 8-inch wafers per month using a 0.35-micron design rule. Consolidation efforts Other companies are also trying to concentrate their next-generation production. Fujitsu, which now makes 64M DRAMs in Japan and the U.S., plans to concentrate 256M-DRAM production at its U.S. plant in Oregon, starting mass production in 2001. Hitachi is moving its main memory-fabrication operations overseas. A joint fabrication plant with Nippon Steel Semiconductor Corp. in Singapore is to start full operations next April. Hitachi is also considering doing most of its production of next-generation 256M DRAMs there. With the current uncertainties in the memory-chip business, semiconductor makers are looking with hope at the increase in the market for system-on-a- chip devices for digital home-electronics equipment. "In current televisions, our devices are used in limited areas. But when it comes to digital TVs, a great market is in front of us," said Yamamoto of NEC. "We are looking at an opportunity." NEC plans to begin volume production of system chips for home appliances such as air conditioners and refrigerators in the first half of 1999. The company said it will expand annual shipments to about 2 million units in 2001.