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Technology Stocks : S3 (A LONGER TERM PERSPECTIVE) -- Ignore unavailable to you. Want to Upgrade?

To: SBHX who wrote (12313)	11/21/1998 12:20:00 PM
From: Synapsid	Respond to of 14577

I believe the costs for Savage3D are high because it is manufactured using a new leading-edge 0.25 process at the USC fab, which demands a premium, as well as suffering from low yield rates. In the 10Q report that S3 recently submitted to the SEC, they mention the following facts: - The Savage3D was intended for the high-end market. - Gross margins suffered because of low yield rates for the Savage3D. - Savage3D shipments were significantly less than expected due to certain performance characteristics of the chip (presumably, they mean not supporting more than 8MB of memory). It appears that the Savage3D, in its current form, was not really intended for the Asian add-in card manufacturers where all the design wins are now. Perhaps some of this activity reflects "dumping" of excess inventories of Savage3D product below cost. In the quarterly results press release, there was a large charge associated with the write-down of older inventory. Perhaps there was also a Savage3D-related part in that charge. One would assume that new pin-compatible versions or revisions of the Savage3D chip (independent from any new high-end offering) will be more cost-effective for the low-end segment, given improvements in yield rates for the 0.25 micon manufacturing process. It's interesting that S3's competitors are also dependent on a 0.25 micron manufacturing process for their upcoming products. However, while S3 manufactures at UMC-affiliated USC, all others have signed with TSMC (I get the impression that UMC's joint-ventures with fabless companies such as S3 may have alienated other competitors away from them).