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Technology Stocks : Intel Corporation (INTC) -- Ignore unavailable to you. Want to Upgrade?

To: Otto Plath who wrote (71516)	1/16/1999 7:08:00 PM
From: Glenn D. Rudolph	Respond to of 186894

Investment Highlights: * Intel (INTC-B-2-2-7, 133 3/4) is close to making a decision on whether or not to move ahead on a pilot 300mm wafer plant (the next wafer size equivalent to 12-inch). Fab D1-C in Oregon will be the development site for 300mm. We think that Intel's management will make a decision in the next 4-6 weeks on whether to proceed or delay the investment. A decision to “go” would obviously be positive for the equipment stocks psychologically and provide meaningful revenues to the industry in 2000. * Intel is clearly interested in moving ahead. The productivity advantages of 300mm wafer fabs is well defined on paper. However, the industry collectively pushed out 300mm development 18 months ago. Most equipment companies have put their 300mm programs on the back burner. The question that Intel now faces is whether or not hundred's of its material and equipment vendors are ready for the transition. * If Intel were to decide to move ahead orders for fab D1-C would be placed over the next several quarters for deliver in October and startup in 1Q'00. The required investment in a pilot line would be small perhaps in the $100-150 million range. Larger orders for 300mm would begin to ramp quickly starting in the 2 nd half of 2000. We think there is a better than 50% chance that Intel will decide to proceed. * Intel completed evaluating 300mm equipment tool-by-tool in December 1998. At the beginning of the 4Q'98 Intel's management expected “that approximately 80% of the required tools will be ready for selection and a January 2000 startup. As for the remaining 20% of the tools, there are no known showstoppers; they will just need to be managed carefully”. * It does not appear to be an easy decision. In the last month, IBM (IBM B-1-1-7, $180 5/8) quietly cut back its 300mm wafer development project in E. Fishkill NY (Bld 323) to the bear bones. IBM's decision will certainly weigh on Intel. Intel believes that it is necessary for the entire industry to embrace 300mm technology since the expense and technical risk are so high and need to be shared by the entire industry. Intel led the transition from 5-inch to 6-inch wafers in the mid-1980's and swore to never pioneer another wafer transition again because of the costs and aggravation. * The transition to 300mm wafers should benefit the entire equipment segment, as it requires an entire new tool set. However, we believe that PRI Automation (PRIA $33 3/8, C-3-1-9) would be the most leveraged stock to a positive decision by Intel. PRIA has automated all of Intel's 200mm fabs. Bulletin United States Semiconductor/Capital Equip 15 January 1999 Mark F. FitzGerald Vice President Tom R. Diffely Industry Analyst Semiconductor Capital Equipment The 300mm Transition: The Mind is Willing But Will the Body Cooperate? Reason for Report: Key Technology Review Merrill Lynch & Co. Global Securities Research & Economics Group Global Fundamental Equity Research Department RC#10201505 Industry