Micron tumbles following Samsung's results, DRAM forecast

Samsung's (OTC:SSNLF, OTC:SSNGY) memory sales were a strong point for the company in Q2: They rose 10% Q/Q and 21% Y/Y to KRW6.92T ($6.7B). But the company also hiked its 2014 DRAM industry bit supply forecast to low-30% growth from a prior high-20%. Samsung itself expects to grow bit production at a high-40% rate.

Morgan Stanley notes Samsung once forecast mid-20% industry growth, and that it's increasing capex to make another production line DRAM-capable in 2015. MS reported earlier this month Samsung is planning to hike its DRAM output.

Micron (MU -7.7%), whose shares have soared on expectations a favorable DRAM supply/demand balance will continue, isn't taking the news well. Samsung's production hike is also a negative for SK Hynix (OTC:HXSCL).

Samsung fell 3.7% overnight in Seoul, though that arguably had more to do with the performance of its mobile ops than its chip ops. Weak high-end tablet sales and smartphone share losses to Chinese OEMs led mobile sales to fall 12% Q/Q and 21% Y/Y to KRW27.5T ($26.6B).

The company expects 2H mobile sales to grow with the help of seasonality, but also (in what's at least a partial reference to the iPhone 6) cautions competition is set to intensify.

Samsung's Q2 slides (.pdf)

Comments (7)
  • Jaret Wilson
    , contributor
    Comments (1207) | Send Message
    An overreaction. Samsung had and is having more production than anticipated, but they still expect demand to meet supply and for the second half to be tight. I'm not surprised by the drop, but the news is not as bad as the price would make it look.
    31 Jul 2014, 11:38 AM Reply Like
  • alan kohn
    , contributor
    Comments (170) | Send Message
    The reaction to Samsung adding capacity demonstrates that investors really don't yet understand or believe that this is changing market. The expanded uses for memory that will dramatically increase the potential market can only happen if there is enough supply to keep prices competitive with the older technology being replaced and dependable supply to not disrupt
    production of devices . The is memory market is getting tighter as OEM's are starting to sign up longer term contracts.
    31 Jul 2014, 12:17 PM Reply Like
  • xlaffx
    , contributor
    Comments (98) | Send Message
    Absolutely! Semiconductor is Samsung's only "shining" spot in their Q2 ER. No way they would like to destroy the balance and cause more headaches than what they are currently having with Mobile business (AAPL with new devices and competitions from Xiaomi in China).
    It is unfortunate that today's market is a perfect storm for MU... bad Macro news come one after another (EU deflation, Russia/Ukraine, Israel/Gaza, bad PMI... and tomorrow's job report). People are escaping without realizing nothing will matter until QE 3 ends.
    31 Jul 2014, 12:48 PM Reply Like
  • Nate Sterling
    , contributor
    Comments (620) | Send Message
    IMHO MU at $30 today is the most undervalued company in the S&P 500.
    31 Jul 2014, 12:58 PM Reply Like
  • domyno
    , contributor
    Comments (93) | Send Message
    31 Jul 2014, 01:35 PM Reply Like
  • domyno
    , contributor
    Comments (93) | Send Message
    31 Jul 2014, 01:41 PM Reply Like
  • domyno
    , contributor
    Comments (93) | Send Message
    31 Jul 2014, 01:43 PM Reply Like
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