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Technology Stocks : Micron Only Forum -- Ignore unavailable to you. Want to Upgrade?

To: Skeeter Bug who wrote (38997)	9/25/1998 1:08:00 AM
From: Estimated Prophet	Read Replies (1) \| Respond to of 53903

Skeeter, I have to wonder why a good capitalist who sees the profit potential wouldn't buy a Korean fab. This is basic microeconomics that we all learned in Econ 101. A fab owned by a company that leaves the industry is going to be placed on the market and snatched up by whatever company sees the profit potential and has the cash. Some here on this thread seem to think that just because a poorly run company leaves an industry, no better run company will jump into the idle plant at a bargain basement price. The only way that won't happen is if the industry isn't going to be profitable, in which case the living will envy the dead.(g) The problem here is the industry, not any one of the companies in it. A farmer who supplies commodities plants fencerow to fencerow, regardless of the price, until he goes bankrupt. Then somebody else with more resources buys the land at foreclosure. And puts it right back into more efficient production of the commodity. That's something we have seen for years out here in Kansas. Farming obviously ain't high technology, but at the firm(single farmer)level, the capital costs are (relatively) great, and the payoff of capital expenditures takes a long time. But nevertheless, there is seemingly no end to the pool of people willing to continue production. There is simply no individual firm incentive strong enough to justify setting aside production capacity. At the firm level, it's better to keep producing in the hope of better prices than to throw in the towel. And when it's impossible to go any further, your moneybags neighbor buys you out. In theory, this cruel commodity business cycle continues until there are so few firms left that they temporarily can control price, and then new entrants screw up their party. Now, in the DRAM biz, which I understand to be a commodity business, there are far fewer companies than there used to be. I have a challenge for the bulls out there: convince me of the number of companies necessary for there to be some price and output control amongst themselves. Then tell me when that's going to happen. Then tell me how long it will last. Then I'll buy and hold whichever companies are going to be around when it happens. EP

To: Skeeter Bug who wrote (38997)	9/25/1998 8:37:00 AM
From: DavidG	Read Replies (3) \| Respond to of 53903

Skeeter, david, true. please listen to what i'm saying before answering the wrong question. i've had enough of that ;-) You never asked a question that I should answer...we were just discussing the merits of Korea selling to someone else. 1. korea can sell their fabs at a substantially reduced price b/c of duress. the buyers need not be korean. this means the buyer's cost basis is less than somebody who paid full price. period. FACT! TRUE! i said nothing about future upgrades and the like. the initial investment and corresponding depreciation will be LESS. FACT! TRUE! this isn't that HARD! I am sorry Skeeter, but this is just nonsense. Nobody in their right mind is going to get into the DRAM business if they are not in it already. All should know by now that DRAM is a cuthroat Commodity business where investors must expect to lose money...yes even if they get the soon to be obsolete fabs for nothing...Moores Law has not been disproven yet. MU got TXN Fabs for practically nothing and they still have to upgrade and expect another 6-12 months of negative cash flow. There are just too many other opportunities out there than to knowingly go into a losing business in a horrible sector. the koreans (hyundai) appear to be on par and well ahead of micron in most areas. mu isn't even close to 0.09 technology and a 15 gb dram - not even in r&d. hyundai already has it in their sights. FACT! TRUE I don't know where you are getting your info but although they may have one advanced fab and the ability to make larger DRAM does not mean the markets are ready for them and that the yields are even close to high enough to generate profits. Most of their Fabs are still above .21 microns and some at still .35. To get to smaller line widths and higher yields cost money in strong currencies such as $US. And that is for todays technology. RDRAM, DLDRAM, 256mb, 1gb etc, are still down the road and will require 12" wafers and new fabs to be efficient They are much better off focusing on their other businesses now like TXN did. DavidG

To: Skeeter Bug who wrote (38997)	9/26/1998 6:42:00 AM
From: Carl R.	Read Replies (1) \| Respond to of 53903

The question of whether or not it is a good idea for someone to cheaply buy Korean fabs (assumming that they were for sale) brings back the debate of fixed costs versus marginal costs. If the marginal costs are not below selling price a fab purchased for zero cost would still be a bad investment. On the other hand, if marginal costs are below ASP then the only question is whether or not you can cover your fixed costs. In this business while a low fixed cost is important, a low marginal cost is critical. Carl