Technology Stocks : Silicon Motion Inc. (SIMO)
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From: Elroy12/10/2017 10:32:18 PM
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Samsung's $26 billion betSamsung is more than doubling its semiconductor fab investment next year. Besides a welcome increase in supply - and a drop in prices - it also is an attempt to dominate, perhaps even monopolize, the critical DRAM and NAND flash markets. How will this play out?

Each of Samsung's top competitors now faces a difficult choice. Either they up their capital budgets to provide enough supply to maintain their market share, or give up trying to compete, as Samsung's higher volumes translate into economies of scale that no one else can match.

Anyone who attempts to match Samsung faces the daunting prospect of industry-wide oversupply. falling prices, and massive losses. Semiconductor plants have to be run at full capacity to obtain lowest costs, so as long as prices cover all variable expenses, and make a contribution to fixed costs, such as debt service, it's worth it to keep them running, even at a loss. It isn't easy to decrease production.

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