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Politics : Formerly About Applied Materials -- Ignore unavailable to you. Want to Upgrade?

To: Sun Tzu who wrote (29767)	4/28/1999 5:27:00 PM
From: Nevin S.	Read Replies (1) \| Respond to of 70976

Just saw that MU received two upgrades today, although its hard to tell whether the analyst upgraded based on the relative price of the equity or underlying fundamentals of DRAM business. I'll have to dig through my files but recently I read a report from Lehman that discussed the relationship between computer sales to new investment in semiconductor capital equipment (SCE). I think they were trying to point out (at the time Compaq pre-announced) that while asp's for computers have fallen and unit sales may show slower growth, there are a host of new electronic products coming on the market that have significant semiconductor content such as PCS phones and set top boxes (digital cable) that will drive new investment in SCE. Later tonight I will try to find it and give some more detail.

To: Sun Tzu who wrote (29767)	4/28/1999 5:58:00 PM
From: Katherine Derbyshire	Read Replies (2) \| Respond to of 70976

>>So what is your conclusion? My hypothesis was that given the low margins and the recent bleeding of DRAM (and other semies), they would be reluctant to spend the money on new process or even expand the existing capacity, unless they sense serious pick up in net revenue and net profits ahead. Do you agree with this? And do you see such a revival ahead?<< In the past, the DRAM companies have demonstrated a willingness to build capacity in the face of almost certain oversupply. They've been willing to go ahead and destroy margins for the whole industry and face purely price-driven competition. I don't see any signs that this attitude has changed, but the bankers do seem much less willing to finance it. Banking reform in Japan and Korea is very important. Overall, my outlook is basically the same that I've presented before: news.semiconductoronline.com That is, sluggish chip growth this year, with good times (and major fab construction) returning next year. Faster than expected improvement in Asian economies could accelerate this. So could predatory pricing and construction on the part of the DRAM suppliers, but that would tend to make the upcycle shorter and the downturn deeper (same reasons as the 1997-98 downturn). The good news is that the Asian economies do seem to be recovering, and the US economy doesn't seem to be slowing significantly because of recessions elsewhere. Regarding PDAs and other portable/home automation, think about chipmakers who don't rely on memory or microprocessors. DSPs, custom logic, transmitters, etc., are all big beneficiaries, as are low power circuits. Lucent, TI, and Rockwell spring to mind in the US. STMicroelectronics, Philips, and Siemens, all European, have been very successful in these markets, too. I include Internet-related growth in this category too, by the way, since I think there's still a huge amount of Internet infrastructure left to be built globally. Katherine