Oct. 6, 2014, 9:25 AM
- Micron (NASDAQ:MU) is under pressure after Samsung announced it's spending $14.7B to build a giant new chip plant. Construction will start in 1H15, and is expected to be finished in 2H17.
- Electronics CEO Kwon Oh-hyun: "Our investment into the new fabrication plant will influence the shaping of Samsung’s future semiconductor business." Samsung (like peers) has seen its mobile DRAM and NAND flash sales grow rapidly over the last two years.
- The company says capacity could be allocated to either memory or logic IC manufacturing, depending on demand. Samsung is the world's biggest DRAM and NAND flash manufacturer, but also has a growing foundry business that's hoping to grab share following next year's 14nm transition.
- Micron sold off in July after Samsung hiked its 2014 DRAM production forecasts, but eventually recovered.
- Aside from Micron, Samsung's plant could have an impact on NAND giant SanDisk (NASDAQ:SNDK), foundry kingpin TSMC (NYSE:TSM), and DRAM/NAND rival SK Hynix (OTC:HXSCL -5.1% in Seoul)
- Update (10:01AM): SanDisk is now down 1.5%. Micron is down 2.5%. TSMC is up 0.3%.
Jul. 31, 2014, 11:18 AM
- 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)
Jul. 9, 2014, 10:18 AM
- Morgan Stanley reports Samsung (SSNLF, SSNGY) plans to hike its DRAM output. Micron (MU -3.5%), whose shares have risen over 6x from their fall 2012 lows, is selling off in response. Peer SK Hynix (HXSCL) fell 4.1% in Seoul.
- Digitimes recently reported Samsung is thinking of building a new DRAM fab in 2015, as industry consolidation and strong mobile and server-related demand keep prices high. The site also reported spot prices for 4Gb DDR3 DRAM chips could rise to $4.80-$5.00 in Q3, after rallying to an 18-month high of $4.35 in late June.
- TrendForce estimates Samsung had 35.5% of the global branded DRAM market in Q1, SK Hynix 28.2%, and Micron 28%.
- This morning, SA author David Alton Clark argued Micron investors should tread carefully at current levels, given the DRAM industry's historical cyclicality.
- Previous: Samsung reportedly planning to hike DRAM contract prices
Apr. 30, 2014, 10:49 AM
- Digitimes reports Micron (MU +2.7%) will likely hike DRAM prices in May "due to low inventory levels in the supply chain and insufficient supply of memory chips from Samsung Electronics (SSNLF) and SK Hynix (HXSCL)"
- Samsung is said to be dealing with low yields for its new 25nm DRAM process, leaving it unable to fulfill orders from PC OEMs, and Hynix's efforts to restart production at its fire-damaged Wuxi, China fab have reportedly been slowed by the installation of new machinery.
- DRAM prices surged last year as industry consolidation, restrained capex, and strong mobile DRAM demand led to a favorable supply/demand balance. David Einhorn's bull case for Micron is based in large part on a belief consolidation will produce long-term changes in the industry supply and pricing dynamics.
- Yesterday, Samsung reported Q1 memory (DRAM + NAND) sales of 6.29T won ($6.08B), -3% Q/Q (mobile seasonality) but +23% Y/Y. The company added PC DRAM demand is stabilizing, and that SSD and high-density memory card sales are boosting NAND demand.
- Samsung expects a "balanced" DRAM supply/demand environment in 2014, and strong PC and data center SSD demand to fuel NAND growth.
Dec. 18, 2013, 2:28 PM
- Raymond James, Piper, and others have defended Micron (MU -6.8%) in the wake of a Bloomberg report stating SK Hynix (HXSCL) plans to build a new South Korean DRAM fab.
- RJ's Hans Mosesmann thinks the reported size of Hynix's planned investment in the fab means the facility will only handle ~5% of global DRAM output, or ~3% of total memory output. Though believing a drop in Micron shares in response to the news is "correct," he considers the magnitude excessive.
- Mosesmann: "We still believe DRAM supply is in structurally better shape now than it has been in decades. We view today’s weakness as a buying opportunity."
- Piper's Jagadish Iyer believes Hynix might be moving capacity from an existing fab to a new one, with the idea of reallocating existing capacity "for other products and/or R&D." He still thinks Samsung, Micron, and Hynix "will continue to keep DRAM supply rational."
Dec. 18, 2013, 10:33 AM
- 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.
Dec. 11, 2013, 10:58 AM
- MKM reports the Wuxi, China SK Hynix (HXSCL) DRAM plant that was badly damaged in a September fire will be operational by mid-January, well ahead of the mid-2014 timeframe forecast by others.
- Micron (MU -2.1%) is slipping, as is SanDisk (SNDK -1.5%), which benefits when NAND flash capacity gets reallocated to deal with DRAM shortages.
- Micron and SanDisk rallied on Monday amid a flurry of positive DRAM sales, pricing, and supply-related news.
- Samsung (SSNLF, SSNGY), the world's largest DRAM manufacturer (37.1% Q3 share per DRAMeXchange), fell 1.4% overnight in Seoul. Hynix rose 0.8%.
Dec. 9, 2013, 12:22 PM
- Digitimes reports DRAM spot prices continue to jump, with recent quotes "soaring more than 5% on a single day." Tight supplies (caused in part by the SK Hynix fire), PC OEM inventory replenishment, and order pull-in from Chinese tablet vendors are said to be contributing factors.
- Naturally, spot price strength is expected to bolster contract pricing, whose growth has been tempered somewhat by attempts from SK Hynix and peers to adjust capacity in the wake of the fire.
- The report backs up recent comments Morgan Stanley's Joseph Moore, who has reported seeing a pickup in orders from the PC supply chain.
- Also: Both Taiwanese DRAM vendor Nanya and Micron/Nanya's Inotera JV have reported strong November sales. Nanya's sales rose 34% Y/Y to NT$3.85B ($130M), and Inotera's sales rose 117% to NT$6.46B ($218M).
- Aided by a favorable supply/demand balance and healthy mobile DRAM growth, the DRAM industry is expected to perform well again in 2014, though growth is expected to slow from 2013's levels. DRAMeXchange forecasts sales will rise 14% to $40B, after growing 32% in 2013.
- Micron (MU +3.9%) is making new 52-week highs, and SanDisk (SNDK +1.6%) is also up. Though not a DRAM vendor itself, SanDisk benefits from DRAM strength to the extent NAND capacity gets reallocated for DRAM production. Samsung (SSNLF, SSNGY) rose 1.8% overnight in Seoul, and SK Hynix (HXSCL) rose 2.4%.
Dec. 3, 2013, 2:12 PM
- Needham's Rajvindra Gill has launched coverage on Micron (MU +1.8%) with a Buy and $30 PT, while asserting the DRAM/NAND flash vendor could see its gross margin eventually rise to 40% from a current ~30%.
- Gill points out rising estimates (aided by the Elpida deal) have led Micron's forward P/E (based on FY15 estimates) to fall to 9 from a July level of 15, in spite of the ongoing rally seen by its shares. He argues Micron should trade at 12x-14x EPS and 3x-4x its tangible book value.
- Echoing David Einhorn and others, Gill declares the newly consolidated DRAM industry is "entering a period of rationality that will focus on [ROIC] as opposed to market share or survival." He also expects the lion's share of DRAM and NAND capex to be directed towards technology upgrades rather than capacity investments. Micron set a market-pleasing FY14 capex budget of $2.6B-$3.2B in July.
- Margin improvements are expected to be driven not only by supply controls, but by a NAND mix shift towards SSDs and cost cuts at Elpida.
- Also: 1) Digitimes reports SK Hynix (HXSCL), still dealing with the fallout from a massive fire at a Chinese fab, is unable to meet demand from its PC OEM clients. 2) DRAMeXchange reports PC DRAM contract prices ticked higher in 2H November, and are likely to be flat or up in December.
Sep. 5, 2013, 2:50 PM
- Countering comments made by SK Hynix (HXSCL.OB) yesterday, Wedge Partners says the fire that broke out at Hynix's Chinese memory fab will cause at least a 2-month production delay, and that Hynix has suspended price negotiations with clients.
- The remarks come as DRAM spot prices jump 20% on account of the fire, and reports emerge several top memory manufacturers have joined Hynix in putting shipments on hold.
- There could be major downstream ramifications: TrendForce thinks 11M notebook shipments and 10M smartphone shipments will be affected within a month if "main production procedures are halted." The firm estimates it will take 6 months for all of the damage to be fixed.
- Prior to the fire, DRAM and NAND prices had been slumping this summer after rallying earlier this year.
- Micron (MU +3%) and SanDisk (SNDK +1.9%) are adding to yesterday's gains. DRAM/NAND giant Samsung (SSNLF.PK, SSNGY.OB) rose 1.9% overnight in Seoul, while Hynix fell 1.8%.
Sep. 4, 2013, 12:03 PM
- SK Hynix (HXSCL.OB) says a fire at a Chinese memory fab caused no material damage to its cleanroom, and that its volumes won't be significantly affected. Likewise, Sterne Agee says Hynix has confirmed production will resume shortly.
- Micron (MU +3.8%) and SanDisk (SNDK +2.6%) have pared their gains, but remain up strongly. With the Chinese fab responsible for 40% of Hynix's DRAM output, any major halt would have a big impact on DRAM and (due to production shifts) NAND flash pricing.
- SanDisk and Micron each saw their short interests jump (I, II) in July and August (SanDisk especially), as investors bet an up cycle in memory pricing (driven by tight supply and strong mobile demand) is coming to an end (previous). The Hynix news may have triggered some short-covering.
- Piper, reiterating an Overweight on Micron and SanDisk, thinks DRAM prices have fallen 5%-15% in Q3, but remain up over 70% YTD.
- Previous: Micron's analyst day DRAM/NAND supply forecasts
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