4 replies to this topic

[Iblayz]

http://biz.yahoo.com...ech01.html?.v=1

[timer]

In other words, they want to buy 'em and want a dip first.

[da_cheif]

In other words, they want to buy 'em and want a dip first.

atta boy....think like a krimnal.....snort

[SemiBizz]

I've seen this movie before. Consumer demand will eventually swallow supply. If and when capital investment falls, it is usually a result of overinvestment. So if they cut back on capital spending, they end up behind the curve, because it only brings us closer to a time of insufficient supply. There's no problem with units, there is plenty of "bit" growth. ASP's are the issue as revenues remain constant to down at the same time #units shipped rises. So if capacity is constrained in semiconductors, that's a good thing. See, it's all in perception, and that is all it takes to get the hedge funds to buy these things for a dead meat trade, so don't count them out... But on the other hand, don't catch a falling knife - who knows where support is?

[Iblayz]

There's no problem with units, there is plenty of "bit" growth. ASP's are the issue as revenues remain constant to down at the same time #units shipped rises.

Research firm iSuppli says the average price for a 512-megabit DRAM chip -- the most common PC memory chip -- has plummeted to $1.86 from $6.24 on Jan. 1. That is a 70% drop, a lot even for a product known for fast price swings.

The question is.....are price drops like these the result of supply and demand (as in oversupply) or....are they the result of commoditization? Once an item gets commoditized....which usually happens when it reaches high volume but common usage.....it's not only hard to make money in it.....but it becomes very, very difficult to maintain anything that even resembles a decent gross margin.

And I'll give you a good example from an area most would find almost laughable right now.....gasoline. For the retailer in many areas it has reached commodity status. Sure they pump thousands of gallons but at what profit. I have a customer across the street from Delta's headquarters in Atlanta. He told me the last two times that I was in his store that things are awful gasoline wise right now. Two trips ago his pool margin (across all octanes) was 1.4 cents. The last time I was in there it was .04 cents. That's right....he's selling gasoline for basically one penny above his cost....and that's before he loses six to seven cents per gallon to fees every time someone puts a credit card in one of his pumps. He said....I'm losing six thousand dollars a month on gasoline. (And please....don't anybody tell me I don't know what I'm talking about....because I do....this is very common....especially for the small operator of one to two stores). These guys think things are wonderful when they can make six or seven cents per gallon of gas......and that is a terrible margin.

My point is....if memory has reached that stage it won't ever come back to big margin status. Maybe it has....maybe it hasn't.....but my guess is that is has.

Edited by Iblayz, 28 May 2007 - 02:16 PM.