William Trent1

Semis With Highest, Lowest Production To Sales Ratio

Ralph - I am comparing the amounts produced to the amounts sold to customers. If more is produced than is sold inventories will rise. If less is produced than is sold, inventories will fall. Too much inventory can be bad for future margins in one of at least two ways: 1) lower production, which due to operating leverage would mean each unit would have a higher cost; 2) obsolescence, which could lead to write-offs. Underproduction can mean lost sales.

Frank - You got two of the three potential reasons, with the other being a temporary shortfall (perhaps due to high seasonal demand or other factors.) In the case of MEMC, the prolonged underproduction is due to limited supplies of the raw material polysilicon. I would classify this as a production problem, but since it applies to all manufacturers it is not an MEMC problem. In fact, it is helping their margins since they are one of the few available sources.

Andrew - per my comment to Ralph, over/underproduction at fabless companies can impact margin through obsolescence or by missing out on sales if the inventory is not available. I think it is still worth looking at the trends for each company, although further analysis would require separating the companies into fab/fabless as well as other segments such as analog or memory.

Will it Take a Liquidity Crisis for Intel to Rationalize Capital Spending?

Nobody is advocating zero capex - I just think they need to spend enough to meet demand and no more. In the long run it is nearly a mathematical certainty that they will do so. It is the short term variations that result in cyclicality.

Will it Take a Liquidity Crisis for Intel to Rationalize Capital Spending?

they are smaller, but Intel appears determined to narrow the gap.

Will it Take a Liquidity Crisis for Intel to Rationalize Capital Spending?

From what I understand Intel is the one company pushing for the latest and greatest from semi equipment, insisting that Moore's law be followed to the letter. If they slow down, everyone else is likely to slow down.

And nobody <em>has</em&g... to keep making capital expenditures that don't earn an acceptable return on capital. In fact, their duty to investors is the opposite.

Making Sense of Semis: Does the Industry Still Have What it Takes?

Nice work!