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Wednesday, Dec 182013, 2:28 PM
Wednesday, Dec 182013, 2:28 PM| 24 Comments
- 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."
Wednesday, Dec 182013, 10:33 AM
Wednesday, Dec 182013, 10:33 AM| 30 Comments
- 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.
Wednesday, Dec 112013, 10:58 AM
Wednesday, Dec 112013, 10:58 AM| 7 Comments
- 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%.
Monday, Dec 92013, 12:22 PM
Monday, Dec 92013, 12:22 PM| Comment!
- 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%.
Tuesday, Dec 32013, 2:12 PM
Tuesday, Dec 32013, 2:12 PM| Comment!
- 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.
Friday, Oct 252013, 4:54 PM
Friday, Oct 252013, 4:54 PM| 7 Comments
- Micron (MU -1.5%) and SanDisk (SNDK -0.6%) finished down modestly after DRAM/NAND giant Samsung (SSNLF, SSNGY) posted decent Q3 numbers and offered an upbeat Q4 outlook (as expected) for its memory chip ops, and Goldman issued a cautious note about Q1 2014 memory pricing.
- Samsung's memory chip sales rose 12% Q/Q and 22% Y/Y in Q3. DRAM sales benefited from strong mobile demand, pending console refreshes, and healthy server DRAM sales.Wwhile global server sales have been under pressure, applications such as analytics apps and in-memory databases have buoyed server DRAM demand. NAND sales benefited from smartphone launches (i.e. the iPhone 5S/5C) and SSD growth.
- Samsung expects DRAM sales to remain strong in Q4 due to mobile/server demand and a favorable supply/demand balance (thanks in part to the SK Hynix fire). NAND demand is expected to remain healthy thanks to mobile/SSD-related orders.
- Goldman's James Schneider, who has Neutral ratings for both Micron and SanDisk (previous), has a near-term outlook similar to Samsung's. However, he also thinks there's "some risk" of NAND oversupply in 1H14, as DRAM production gets shifted to NAND, and expects DRAM prices to drop after SK Hynix's (HXSCL) production returns to normal.
Monday, Sep 302013, 5:54 PM
Monday, Sep 302013, 5:54 PM| Comment!
- Susquehanna's Mehdi Hosseini reports spot prices for 2GB 1333MHz. DDR3 PC DRAM chips remain 45% above contract prices in the wake of a giant Sep.4 fire at an SK Hynix (HXSCL.OB) plant that knocked out a large chunk of global DRAM output. Contract prices are up 5% in Q3, adding to large YTD gains.
- NAND flash contract prices are down 3% on the quarter, but spot prices for most NAND types are now well above contract prices. The Hynix fire has been expected to boost NAND prices by shifting NAND production towards DRAM.
- In spite of the figures, Hosseini rates Micron (MU) a Hold. However, he has Buy ratings on fellow memory makers Hynix, SanDisk (SNDK), and Samsung (SSNLF.PK, SSNGY.OB).
- On Friday, Stifel joined the Micron PT-raising bandwagon ($24 from $20). The firm was encouraged a talk with Micron's IR chief focused on "structural changes to the memory industry" brought about by consolidation, rather than "tactical issues" such as ASPs and cyclical trends.
- Previous: Micron receives another PT hike as DRAM prices soar
Monday, Sep 232013, 2:37 PM
Monday, Sep 232013, 2:37 PM| 4 Comments
- Wedbush's Betsy Van Hees, who is lifting her Micron (MU -1.6%) PT to $23 from $16: "While checks indicate demand for handsets, PCs and tablets have modestly improved since Aug, any prior concerns we had for near-term memory supply outstripping demand have been eradicated following the fire at SK Hynix's (HXSCL.OB) DRAM fab in China..."
- RBC upped its Micron PT two weeks ago on account of the fire, noting it puts 30% SK Hynix's 2013 DRAM production "at immediate risk." Susquehanna upgraded shares to Neutral, estimating the fire will lower OEM/channel DRAM inventories by 2-3 weeks. Hynix expects to be back to full capacity somewhere in November.
- DRAM prices, which were already up strongly in 2013 going into September, have been soaring since the fire broke out on Sep. 4; DRAMeXchange estimates spot prices for 2Gb DDR3 chips are up 42%, benefiting both Micron and Samsung (SSNLF.PK, SSNGY.OB).
- SanDisk (SNDK -0.5%) benefits to the extent tight DRAM capacity/surging prices lead manufacturers to reallocate NAND production lines to DRAM.
- Micron is selling off today, but remains up 12% since news of the fire first broke.
Thursday, Sep 52013, 2:50 PM
Thursday, Sep 52013, 2:50 PM| 2 Comments
- 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%.
Wednesday, Sep 42013, 12:03 PM
Wednesday, Sep 42013, 12:03 PM| Comment!
- 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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