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

To: Sun Tzu who wrote (39301)	9/29/1998 12:44:00 AM
From: Carl R.	Read Replies (2) \| Respond to of 53903

I doubt that DRAM prices will ever rise for long. Rather the question is will the rate of decline slow down to the point that costs fall faster than the selling price. This quarter the gross margin was negative 10%. If the ASP for the quarter was say $9 then the cost of production was $9.90. But there was a link posted earlier that said that as leading DRAM makers moved to .21 micron their yields would double by the end of the year. If the cost of testing, packaging, handling, distribution, etc is $2/chip then a doubling of yields would reduce the cost /chip from $9.90 to about a shade under $6. If the packaging /handling cost is only $1/chip then the cost would fall to $5.50. Thus to me it is reasonable to believe that with their aggressive ramp to .21 micron the average cost for MU next quarter could be as low as $6 or a little more next quarter. From an examination of the financials it appears that to break even MU needs to make a positive margin of about $1 per chip, or an ASP of about $7 next quarter. Of course this ignores any impact the TI deal will have, but I have no idea what that will be. If the ASP stays in the $8.50 range and then falls to $7 in November and $6 in December I would think MU would break even next quarter. Thus to me the key question is how long the price stays above $7. Carl