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To: Stefan who wrote (44843)	4/6/1999 1:14:00 AM
From: Carl R.	Read Replies (1) \| Respond to of 53903

Hi Stefan, you raise an interesting point. Yes the extra production is coming from shrinking the dye, not building fabs. DRAM makers used to push the limits of semiconductor manufacturing, but during the high profit years they got lazy and as recently as a few years ago they were a generation or two behind Intel. During this war of attrition they have rapidly shrunk the die, shooting right through .25µ and now through .22µ with scarcely a blink on their way to .18µ. This has indeed led to a surge in production and an unusual decline in costs. By year end the DRAM industry will have caught Intel, and then just like in the early 80's, DRAM will once again be pushing the limits of what is physically possible. Surely you don't think that by the end of next year they will be at .15µ and at .12µ the year after? Surely you don't think that they will begin another round of fab construction? Therefore it is reasonable to believe that the rate of increase in production will dramatically fall after the end of this year, allowing prices to stabilize. No, the cycle is very normal, and what is old is new again. The only question is trying to figure out if we've reached the bottom yet. Personally I think that there is too much optimism and spending in DRAM production for this to be the bottom, and therefore we need one more gut-wrenching price decline to clear out a few players. Carl