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Micron tumbles on report of new Hynix fab

  • Bloomberg reports SK Hynix (HXSCL), still recovering from a September fire at a Chinese DRAM fab, plans to build a new South Korean DRAM fab to address surging mobile DRAM demand.
  • Construction will start next year, and production could begin in 2015. Hynix reportedly plans to spend KWT4T ($3.8B) on the fab, and to upgrade existing facilities.
  • Micron (MU -6.8%) investors aren't taking the news well. Shares have flown higher this year thanks to rising memory prices and expectations a newly-consolidated DRAM industry will see a favorable supply/demand balance for years to come. Micron significantly increased its exposure to mobile DRAM, which tends to carry higher margins and see less price volatility than PC DRAM, through the Elpida deal.
  • A new Hyniix DRAM fab would also be a negative for Samsung (SSNLF, SSNGY). DRAMeXchange estimates Samsung had a 37.1% Q3 DRAM share. Hynix is assigned a 28.5% share, and Micron a 26.2% share.
Comments (30)
  • RonJadler
    , contributor
    Comments (37) | Send Message
     
    How long does it take for a fab to come on line? If they start construction in 2015, when will the reliable manufacturing start?

     

    Is this just a capacity addition or a meaningful technology improvement?
    18 Dec 2013, 10:44 AM Reply Like
  • Plexander
    , contributor
    Comments (10) | Send Message
     
    Construction starts in 2014. "next year" might be a bit misleading because it starts in two weeks.
    18 Dec 2013, 10:54 AM Reply Like
  • RonJadler
    , contributor
    Comments (37) | Send Message
     
    Sorry, misread the dates.
    Still, how long to be really on line?
    18 Dec 2013, 11:21 AM Reply Like
  • lewhite
    , contributor
    Comments (160) | Send Message
     
    Construction to begin in 2014. Any meaningful production or addition to capacity won't happen until the 2nd half of calendar 2015 I suppose Hynix will be able to shift production from DRAM to NAND as demand dictates. One could argue that increased demand and decrease in wafer output (due to more difficult process steps as technology improves for existing fabs) will offset much of the increased capacity a new fab offers. If economic conditions remain ok, pricing should remain stable.
    18 Dec 2013, 11:51 AM Reply Like
  • Bigisbetter
    , contributor
    Comments (441) | Send Message
     
    This kind of competition would have been previsioned by market analyst of Micron tech, so things would have to accomodate in ST, becasue this comes after a huge move by MU to the upside after dissapointment Q results. All the move up based on expectation, nothing real. So there is to be correction. Time to take some positions at 19. Below 19, 17.
    18 Dec 2013, 10:49 AM Reply Like
  • chadm
    , contributor
    Comments (35) | Send Message
     
    Really good news for those looking to buy MU... I added to my holdings twice today and if it drops in the teens I'm selling other holdings to put into MU. This is a great opportunity. Same goes for Apple... I was really hoping it would drop more then it did.
    18 Dec 2013, 10:54 AM Reply Like
  • eduso
    , contributor
    Comments (90) | Send Message
     
    Agree about overreaction. A plant planned and not yet operational for a year is a threat? (Next to another one, which is still being rebuilt after the fire three months ago?)
    18 Dec 2013, 11:04 AM Reply Like
  • matvox
    , contributor
    Comments (49) | Send Message
     
    To me, this is completely asinine. Tell me no one thought HYNIX would eventually, probably sooner rather than later, build a new factory? Isn't that what they're in business to do, sell chips? The fact that it won't come on line to, maybe, 2015, means MU still has well over a year of current pricing. Please....
    18 Dec 2013, 11:00 AM Reply Like
  • Astro791
    , contributor
    Comments (18) | Send Message
     
    Apparently Hynix thinks chip prices will stay high enough to support the investment. This makes the Elpida buy look even better. Margins for Micron will be wide for years.
    18 Dec 2013, 11:06 AM Reply Like
  • i_am_seeker_2
    , contributor
    Comments (418) | Send Message
     
    It will take at least 18 months from groundbreaking to first production, then a few more months to get the fab production qualified and good yields. The fab is still being planned! There may be some unqualified production in 2015, but that's it. Assuming they actually do break ground sometime in the next 6 months, and everything goes smoothly.

     

    Plus demand for mobile chips is growing, the production will be needed. And $3.8b fab is not much for a fab these days. And that number includes maintenance and expansion at other fabs. This is a gross overreaction by people who don't get the chip business at all, and somehow believed that no new production would ever built. They are idiots. Smart money will come into the stock soon, maybe even this afternoon. Certainly after this options expiration is over, next week.
    18 Dec 2013, 11:22 AM Reply Like
  • Arizona Lefty
    , contributor
    Comments (89) | Send Message
     
    The smart money has been buying all morning, in the tens of millions of shares. The smart money will continue to accumulate all day. I would not be surprised to see MU back well above 22 before the end of the trading day.

     

    IMO, this whole junk story was to shake out the weak hands to provide a buying opportunity for deep-pocket buyers at late November levels.
    18 Dec 2013, 12:08 PM Reply Like
  • TFCAB
    , contributor
    Comments (1942) | Send Message
     
    The new fab will not produce the first chip until june 2016.....it takes a year to build a walmart......and that is with plans in hand
    18 Dec 2013, 11:51 AM Reply Like
  • khlim115
    , contributor
    Comments (72) | Send Message
     
    The article states "The company is considering plans for a new DRAM factory, although no details have been decided--". Not much flesh to chew on. July 22 calls.
    18 Dec 2013, 12:03 PM Reply Like
  • patt2374
    , contributor
    Comments (536) | Send Message
     
    What an absolutely ridiculous response to something that will not even be on line until late 2015 at best.

     

    People do not read whole articles, only titles, and then just react like sheep to a car horn. Here is a reprint of the actual story and pay close attention to who published it; Bloomberg - where their writers bonus's are partially predicated on how much they move the market and this has been validated if you think I am exaggerating. Just follow this link for verification of this practice they freely admit to :

     

    http://nyti.ms/1jihp38

     

    HERE IS THE EARTH SHATTERING STORY(TONGUE FIRMLY PLACED IN CHEEK) FROM YAHOO FINANCE
    "Micron drops following report that competitor will build factory
    Shares of flash memory maker Micron (MU) are falling after Bloomberg reported that one of the company's competitors plans to build a new factory in South Korea. WHAT'S NEW: Hynix intends to build a new factory next year, and upgrade existing facilities, the news service stated, citing two unnamed sources. The world's second largest maker of memory chips, Hynix could begin producing chips at the new factory as early as 2015, Bloomberg quoted one of the sources as saying. ANALYST REACTION: In a note to investors, Susquehanna analyst Mehdi Hosseini wrote that the news is "marginally negative" for Micron. After speaking with Hynix, Hosseini reports that the company is considering building a new plant. However, the plant wouldn't be completed until the second half of 2015 at the earliest, the analyst suggested. Furthermore, Hynix is considering building the factory because one of its current facilities is "outdated and inefficient," added Hosseini, who kept a Neutral rating on Micron. PRICE ACTION: In mid-morning trading, Micron dropped $1.75, or 7.6%, to $21.17."

     

    It is just bizarre and well just plain bi polar like reaction to something that is at least 2 years away from having any effect on dram inventories for at least 24 months. Grow up people. What are mobile chip consumers going to do between now and then for dram?
    Are you philapiphist to the stock market or just like losing money for no reason?
    18 Dec 2013, 12:05 PM Reply Like
  • chipmarketing
    , contributor
    Comments (27) | Send Message
     
    The "new" fab is just going to replace an old fab. No new capacity other than technology upgrade one if those.
    18 Dec 2013, 12:32 PM Reply Like
  • Dirtymick
    , contributor
    Comment (1) | Send Message
     
    This feels like an overreaction to me. We are talking about a plant that most likely won't be online for two years. This news does not really change the positives we have seen so far. Having said that, there must have been some pent up sell side pressure for it to react so negatively. I was content just riding the bull wave but now I need to pay more attention to this again. I am wishing I had some cash freed up so I could buy more if it continues to drop. Still long MU.
    18 Dec 2013, 12:44 PM Reply Like
  • FiftyFiv3
    , contributor
    Comments (3) | Send Message
     
    I'm surprised that this information would cause a -700bps movement in MU. There must be more to it. Weren't EPS estimates released as well this morning?
    18 Dec 2013, 12:44 PM Reply Like
  • i_am_seeker_2
    , contributor
    Comments (418) | Send Message
     
    No more to it other than this Hynix "news" and a lot of hot trading money in Micron. I am sure than plenty of stops were tripped this morning, as well as short term traders who bought for an end of the year run up combined with the Jan 7 earnings announcement and who thought that they had easy money but they are selling the stock now because -- other people are selling, lol. And of course the bromide that tells them to sell first and ask questions later when supposedly bearish "news" comes along.
    18 Dec 2013, 12:52 PM Reply Like
  • EternalOptimist
    , contributor
    Comments (12) | Send Message
     
    It's a >200% gainer that has a lot of people giddy with profits. Any excuse to cash out a little during the uncertainty leading up to earnings report works for them. I still like the long story and added a little on the dip. To me this is still a bit of a reconciliation quarter with all of the activity over the last year still being worked into the bottom line.
    18 Dec 2013, 04:34 PM Reply Like
  • patt2374
    , contributor
    Comments (536) | Send Message
     
    I would imagine Ichan (sp?) is enjoying this mornings fire sell on both the share and option side very much and buying like crazy.

     

    Wish I had that kind of money.
    18 Dec 2013, 12:53 PM Reply Like
  • patt2374
    , contributor
    Comments (536) | Send Message
     
    Here is a more recent link to Bloomberg's writers bonus structure and why articles like the above should carry no weight whatsoever:

     

    http://read.bi/1cEMM2n
    18 Dec 2013, 01:00 PM Reply Like
  • Retired Securities Attorney
    , contributor
    Comments (1882) | Send Message
     
    The Bloomberg article says:
    1. Hynix "plans to invest at least 4 trillion won ($3.8 billion) next year on the plant and on maintenance and technology upgrades at existing facilities..."
    2. "Spending on maintenance and technology upgrades will be about 3 trillion won next year, the people familiar with the plan said.
    3. Simple subtraction produces only 1 trillion won or $950,000 left for the new plant. A $950,000 plant isn't enough to build anything that can produce mobile dram, unless you are building and equipping a large garage.
    18 Dec 2013, 01:19 PM Reply Like
  • patt2374
    , contributor
    Comments (536) | Send Message
     
    so why the crazy sell off and 60% drop options ?

     

    and why no real bounce back this afternoon?
    18 Dec 2013, 02:37 PM Reply Like
  • Rumpel Pumpel
    , contributor
    Comments (246) | Send Message
     
    I dont know why this is bad news for MU. This just shows me that MU saved about 2.3billion with the purchase of Elpida. The aquisstion did cost MU like 1.5 billion. And now Hynix is builduing ONE fab for 3.8 billion. How can this be bad for MU, since it only showed HOW CHEAP Elpida was. Good opportunity to get long here.
    18 Dec 2013, 03:42 PM Reply Like
  • Arizona Lefty
    , contributor
    Comments (89) | Send Message
     
    Actually, Hynix is "considering" building a new cleanroom. No new wafers. Not one.
    http://tinyurl.com/nsf...

     

    "Needham & Co.’s Rajvindra Gill joins Piper Jaffray and Raymond James in defending the stock, reiterating a Buy rating and a $30 price target, writing that the rumors “are largely misunderstood,” and that in fact Hynix itself is implying any new facilities appear to merely an enhancement to existing production:

     

    Rumors that SK Hynix is planning on building a new DRAM fab in Korea which would be up and running as soon as 2015, are dragging MU shares lower this afternoon. The rumors indicate that SK Hynix is planning on spending $3.8bn in CapEx in 2014 (including the cost of a new plant, and upgrades to current facilities), however SK Hynix formally responded to the rumors stating it is currently considering building a new cleanroom to help modernize its older fab, and keep the company up to par competitively longer term. They went on to say that while the company is considering this option, they had yet to finalize plans, and would make a formal announcements."
    18 Dec 2013, 04:13 PM Reply Like
  • Rumpel Pumpel
    , contributor
    Comments (246) | Send Message
     
    haha thats funny, thanks for posting. It shows how unstable MU is at the +20$ prices. Many people on the quick run, getting scared out due to a leak of research and knowledge, in what they actually invest.
    18 Dec 2013, 04:25 PM Reply Like
  • lewhite
    , contributor
    Comments (160) | Send Message
     
    Rumpel
    It's because in the past, any decent improvement in DRAM pricing led to the players building new fabs (MU included). We are all hoping that this time is different with only 3 producers of DRAM chips for the merchant market; Micron, Hynix, and the giant in the room, Samusung. Hopefully, all will show some restraint in adding capacity. Russ Fischer, ElPred, RSA, an others feel that this will be the case. Until this can be proven, MU's stock probably will be volatile and sensitive to this kind of info.
    18 Dec 2013, 05:00 PM Reply Like
  • Retired Securities Attorney
    , contributor
    Comments (1882) | Send Message
     
    Thanks, Lefty. That makes much more sense.
    18 Dec 2013, 05:04 PM Reply Like
  • dfloydr
    , contributor
    Comments (48) | Send Message
     
    Hmmm. I just installed 8 gig of new Micron Crucial memory in my Apple computer. I bought it from Crucial 4 days ago for $86. Today the same item from Crucial is priced @ $97.
    20 Dec 2013, 08:49 AM Reply Like
  • matvox
    , contributor
    Comments (49) | Send Message
     
    BUy, buy buy! There are many momentum players in MU with no deep conviction so they scatter at the drop of a hat. Remember the 10% drop back in October? How long did that take to recover? Not long. Strong 2014 consensus in MU. Forget about 2015-16 for the moment. Margins will increase throughout 2014 and those numbers will push the stock higher. In another year, who knows? But it's certainly no reason to freak out now. I'm doubling down.
    21 Dec 2013, 12:45 PM Reply Like
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