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To: Ed Beers who wrote (44385)	3/25/1999 10:12:00 PM
From: Carl R.	Respond to of 53903

My guess is that it is apparently due to several things. Start by looking at last quarter, because it is really last quarter that is out of whack, not this one. A company buys another company that is nearly as big as themselves. Meanwhile they do a shrink from .25µ to .21µ which should dramatically increase production. Somehow, mysteriously, bits shipped actually fall 10% despite all the additional capacity. It makes no sense. This quarter actually makes more sense than last quarter. So what happened? First of all, they clearly they had a bottleneck in testing last quarter. Secondly, I don't think they got any significant production from the TI fabs last quarter. Perhaps TI kept all the chips from wafers in process, so MU didn't get any chips until the new wafer starts coming out the back end. I really don't know. But I do know that MU's sales for Q1 did not reflect any production at all from the TI fabs. So last quarter MU's internal production fell due to a bottleneck in testing, and they shipped no chips from the TI fabs. That makes this quarter easier to understand. They solved the testing problem, which released some extra chips. Yields improved at .21µ, as they always do. And they got finished product from the TI fabs. Thus the way I see it, this was a one time jump, but production will not fall from this level, but rather will increase from here. The increases from here will be at a more traditional rate, however. These increases will be caused by updating the TI fabs, the results of which should start to be seen this quarter, and further yield improvements. As I said, this is my understanding. Others may differ. I haven't listened to the conference call yet, and will post additional thoughts after I get a chance to do so, Carl