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To: patrick tang who wrote (14780)	9/4/1998 4:28:00 PM
From: shane forbes	Read Replies (1) \| Respond to of 25814

Patrick: Don't get me wrong. I have mentioned on this thread several times (in my past life) that I thought the high end people would be in short supply very soon (Yes I said that in March or April - expecting the high end to show strength by now - for awhile LSI obliged since they were virtually the only one who was ramping up while others were suffering) and that the shortage of capacity in the higher end area was very real. So I am not debating at all the lack of capacity at sub- micron. Nor am I debating the Korean threat. I have said again here several times that DRAM to high end logic is not easy and that the Korean threat was vapor ware. But the Taiwanese threat is not. But I do believe in the fabless/IP model and I must mention that LSI still does a fair bit of stuff at 0.35u. I believe they are upgrading to 0.25 and below in Japan and maybe well on the way there. But just because a company has 0.25 and below does not mean that all designs are at 0.25 and below. Far from it! So what does this mean now? Well the issue is how many designs and how much revenue is LSI getting due to 0.25u capacity and below and how much due to above 0.25u capacity. If it turns out that 0.25 and below is 75% then fine. More likely 0.25 and below is around 50% ( and more likely less - maybe 30-40%) which means above 0.25u is also around 50% (and more likely 60%). What's to stop existing designs at 0.35u nowfrom being made at TSMC et al and then using the profits from that generation to migrate up to 0.25 and below when the high end SLI designs start being produced in high volumes (as LSI is just now beginning to do - the 5 Horses of the Acopalypse - DVD, DCAM, FC, GSM, CDMA and I guess now the HyperPhy related core and the new storage related chips) True real SLI designs come alive at 0.25 and below but there are plenty of quasi-SLI designs that work quite well at above 0.25u now. FWIW the good times for TSMC lasted several years and may have seen 50% net margins as recently as last year. LSI in their best mode was at 20% net. So which is the better model - 50% net for several years or (20% net for 1 quarter and 10-15% 90% of the time)? <g> This is the worst downturn ever (likely) so TSM at 70% though not good is not nec. atrocious when all things are said and done. LSI has always had high end designs but the trick in semi land is to fill the fabs. No point building the world's best mouse trap if there aren't any mice to catch <g>