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

To: Jack Kunkle who wrote (30749)	5/31/1999 9:19:00 PM
From: shane forbes	Read Replies (2) \| Respond to of 70976

Jack: Some mostly random points: - What if in tomorrow's 'chip' you have the functionality equivalent of 20 of today's chips at half the price - note even though the number of chips went down my ASP rose - in this case 900%! And so why should it be so miraculous that 'chip' ASPs are rising. If the functionality is increasing faster than the price is dropping it is possible that ASPs will rise? - I did not read it at all but 'exponential cost of fabs' is still not a problem. Why? Outsourcing. The Taiwan foundries can lower the cost structure per chip by spreading the fixed costs over several companies' chips. Note that in this argument actually brings DOWN the ASPs while in theory (and slipshod thinking) having separate fabs for each company pushes up ASPs (nope). - As mentioned before I suspect the price per logic gate or some such metric where we can look at the cost per 'something that has remained the same in the last several years' will show a sharply decreasing curve. This would be the right analogy to a loaf of bread argument and this would be support for your price should decline argument. You compare something today with something of yesteryear but you make damn sure it is the same 'something'. The functionality of a gate has not changed; the functionality of a chip has changed! - Big picture. Though useful and fun, the key criterion is and always shall be the amount of money chip companies make. If they don't make much the chip equip companies will suffer (as a group). ASPs are only one-half of the equation - your right eye's closed while the left is open. After all price*volume equals revenues and sure there will be a correlation sometime between price (ASP) and revenues. And in such cases if ASP goes down, revs will be down or vice versa. But the correlation is just that! A correlation. Imagine a situation where your ASP increases 5 fold but you are selling 1/10th the number of chips. Are you a happy camper? Well unless you pulled some financial magic you are most certainly not! If this happened to the whole industry would the industry be a happy camper? - Continuing the previous point, I suspect the correlation will drop as product differentiation continues and the %ge of commodity chips decline.