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

To: Katherine Derbyshire who wrote (30735)	5/30/1999 3:30:00 PM
From: Skeeter Bug	Read Replies (2) \| Respond to of 70976

>>Chip average selling prices normally trend upward<< katherine, could you please elaborate? this doesn't make intuitive sense - but i can't evaluate the statement w/o understanding more about the argument. tia...

To: Katherine Derbyshire who wrote (30735)	5/30/1999 11:26:00 PM
From: shane forbes	Read Replies (1) \| Respond to of 70976

Katherine: Even more fundamental is capacity utilization as the this governs what the ASPs will be (Bill McClean's thinking). When you think about it, depreciation costs are the largest expense for these companies and so it is absolutely no surprise that capacity utilization is the underlying key statistic. I have always believed that (because of those high depreciation costs again) that the supply side of the equation is the key. Demand is there and always there. All this hogwash about GDP and so on is almost not relevant. This is a world that can't work without silicon. The fabs are so expensive and the incremental increases in capacity come in billions of chips not millions of chips that the companies either lose a lot or make a lot. There is not much middle ground. The rapid fluctations (the std. deviation) of the growth rate is due to capacity additions and not demand. Or more correctly, capacity additions (supply) have a much much greater effect on prices than demand. And the pundits can take that to the bank. BTW it is good that the semi-equips are seeing a momentary lapse. If their customers (the chip companies) are already upgrading capacity in droves all is lost. I don't sense an all round rush to capacity and so I think all is not lost. There are plenty of fabs still doing nothing (NSM's Portland fab). And I can vouch for the ASP increase. I have seen the numbers. People should understand two things here. One - the average chip has a lot more bits so you can't quite compare 1 chip ASP today and 1 yesterday. Two - just because 16 MB DRAM is 90% cheaper today than it was 5 years ago does not mean ASPs have declined - after all the companies may have sold 90% 16 MB DRAM 5 years ago and just 15% today. I think it is fair to say the per bit price has dropped relentlessly but that is not the governing criterion. In fact in the final analysis it is just revenues (and profits!) plain and simple. How to get there is left to each company. To be honest with sufficient product differentiation there should be a difference drawn between commodity types and non comm types of chips. Comm is decreasing as a %ge. And that's good. People should compute an ASP for MU and then decide what is really going on. Commodity = Asking for trouble. Capital is still relatively cheap and so there is lots of pressure on these commodity companies these days. There always will be. The Koreans can get plenty of dollars. But you can't buy intelligence (IP) as easily.

To: Katherine Derbyshire who wrote (30735)	5/31/1999 10:34:00 AM
From: Jack Kunkle	Read Replies (2) \| Respond to of 70976

Katherine: G. Dan Hutcheson and Jerry D. Hutcheson say: <Because the doublings in density were not accompanied by an increase in cost,.......Higher levels of integration mean greater numbers of functional units can be integrated onto the chip, and more closely spaced devices, such as transistors, can interact with less delay. Thus, the advances gave users increased computing power for the same money, spurring both sales of chips and demand for yet more power. > sciam.com After inventing the assembly line Henry Ford was able to bring the automobile to the public. It dropped the price of an automobile from $950 to $290. In "real" dollars is a Ford more expensive that what it was in 1927? I find it very hard to believe that average selling prices for commodities trend upward over time. <"I really don't like to "pull rank" in these discussions"> I don't mean to attack your position (whatever it may be), however I have been taught to scrutinize any data series and subsequent conclusions including mine. Regards, Jack Kunkle