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To: Skeeter Bug who wrote (44782)	4/3/1999 10:01:00 AM
From: Carl R.	Read Replies (1) \| Respond to of 53903

Yes skeeter, there's a correlation. And now, once again, we get to see who gets squeezed. Who will slash production to try to hold up prices? Who will toss in the towel? Last time prices stabilized at about $8, slightly under the cost of production of many players, and significantly under the costs of others. My guess is that this time around the costs will stabilize in the vicinity of $6, and certainly no lower than $5. Those producers that haven't reduced costs by 25-35% since fall will be in big trouble again. With MU doing another shrink at 16mb, their production will no doubt increase at 16mb, and we can expect to see 16mb prices fall quickly as well, which will squeeze the trailing players like Nan Ya very hard. Despite MU's progress in decreasing output, they will probably be close to breakeven again this quarter, perhaps below it. This realization could drive the price of the stock down again, one last time, giving one more buying opportunity. But ramping up production at .18µ will be harder than at .21µ because MU and others such as Samsung will now be pushing the frontier, along with IBM and Intel. There will almost certainly be at least a 2 year delay after 1999 before we see .15µ, allowing production to stabilize. My guess is that after leading DRAM makers hit .18µ, easy yield increases cease, and production volumes stop rapidly increasing, setting the stage for a prolonged recovery. I believe that .18µ will be adequate for 256mb chips using 200mm wafers. After that I predict that the next wave of investment will be to move to 300mm for production of 1gb chips, perhaps coincided by a move to .15µ. This will be about 2002. In the short run, I see another round of squeezes. I wouldn't be surprised to see some more casualties in DRAM this year, as trailing DRAM makers are squeezed hard by MU driving down prices on trailing products. There are still plenty of fabs making 16mb chips, and driving down 16mb prices aggressively will hurt them badly, and perhaps discourage them from moving to 64mb. Following this round of squeezes, I see a long, slow recovery that should last from early next year until 2003 or so. Carl