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Technology Stocks : Cymer (CYMI) -- Ignore unavailable to you. Want to Upgrade?

To: Elroy Jetson who wrote (19785)	10/3/1998 9:03:00 PM
From: ben luong	Respond to of 25960

Interesting News from MU that might affect CYMI: While the DRAM slump already has lasted far longer than he anticipated, Appleton (MU CEO) is convinced conditions will improve soon. He notes that spending on DRAM front-end equipment this year is expected to reach only $4.5 billion, one-third the level of recent years. "There's no way that's going to sustain the DRAM industry," he says, especially since most chip-manufacturing equipment is effectively obsolete in three-and-a-half years. That means most of the equipment installed at the peak of the industry's mid-90s boom will soon need replacing. "You have incredible under-investment occurring right now, because nobody has any money," he says. "And you have an increasing rate of obsolescence occurring in the equipment. Those two factors are going to turn the market." Additional quotes: Micron's biggest hurdle, however, may be to simply survive the remainder of the DRAM industry's worst price slump, which has been brought on by a glut of manufacturing capacity. Even for industry veterans accustomed to continuous price declines, the speed at which DRAM prices have fallen recently has been breathtaking. Just two-and-a-half years ago Micron's memory chips were selling on average for $3.75 per megabit. By this July the average price was 16 cents, a decline of more than 95%. To make matters worse, while prices have been tanking, the industry's output has continued to increase by nearly 80% per year, driven both by overexpansion and growing demand. The overall DRAM industry is expected to lose as much as $10 billion on sales of $14 billion this year, compared with sales of almost $41 billion in 1995 (see DRAM forecast chart, p. 52). Despite recent signs that prices may be stabilizing, most analysts don't expect the market to recover significantly until late next year, and, more likely, the year 2000. To achieve such small dimensions, Micron shrinks its chip designs and manufacturing processes roughly every nine months. "We've always been able to take the most advanced technology, implement it into the facility and get all of our product line running it--not just the new generation, but all of our product line," says Appleton. Thus, while some DRAM makers are still converting fabs from .35-micron manufacturing processes to 0.25 micron, by this past August Micron had already shifted production of more than half of its 64-Mbit chips to circuit widths of 0.21 microns. Moreover, the company was well on its way to introducing 0.18-micron technology in its next die shrink. IT LOOKS LIKE THAT, IN ORDER FOR DRAM MAKERS TO SURVIVE, THEY HAVE TO SHRINK THEIR DIE SIZE TO REDUCE COST AND INCREASE VOLUME PRODUCTION. TO SHRINK THE DIE SIZE, THEY NEED CYMI'S LASERS IN THEIR STEPPERS. DRAM MAKERS EITHER GO BANKRUPT BECAUSE THEY DON'T HAVE THE CAPITAL TO INVEST IN NEW EQUIPMENT AND THUS CANNOT REDUCE COST, CONSOLIDATE, OR FIND SOMEWAY TO COME OUT WITH THE CAPITAL TO UDGRADE THEIR EQUIPMENT SOON IN ORDER TO SURVIVE. CYMI WILL STAND TO BENEFIT FROM THIS INEVITABLE TREND.