I think the next analyst's changes we get will be upgrades, not downgrades. It seems sentiment is turning more positive for the sector.
Global chip stocks rebound as DRAM prices climb
By Lucas van Grinsven, European technology correspondent
LONDON, March 23 (Reuters) - Shares of semiconductor chip companies around the globe rose sharply on Friday as chip prices rebounded amid signals that an inventory glut was evaporating.
Spot prices for benchmark DRAM memory chips used in personal computers rose on Thursday for the first time since November and stood $0.10 higher at $2.35 for 64 Megabit. They had been at a $2.25 low since March 5.
The rebound coincided with upbeat comments from U.S. chip manufacturer Micron Technology Inc (NYSE:MU - news) which helped send the Philadelphia semiconductor index (^SOXX - news) up by 12.3 percent on Thursday after a fall of 54 percent since August.
Micron said its semiconductor operations produced $1.05 billion in sales in the second quarter, which was ahead of some analysts' expectations.
Investors were also cheered by fresh signs that large DRAM memory chip inventories are quickly being used up, setting the stage for a stable market with recovering prices.
Echoing last week's comments from German chip maker Infineon , executives from Micron and South Korea's Hyundai Electronics Co. also said inventories were getting close to normal.
PC DEMAND REASONABLE, MORE MEMORY BEING USED
One reason for the recovery was that PC demand did not appear to be slackening much in Europe and Asia. Also, computer makers were putting more memory in their products which was already reflected in their High Street offerings.
SG Cowen analyst Richard Chu said in a report that it appeared the DRAM (dynamic random access memory) business had hit bottom and that Micron's second quarter earnings would be ``no worse than consensus.''
Robertson Stephens noted that lower inventories for Micron's customers were a good sign, and WestLB Panmure pointed at price recoveries elsewhere.
``More good news for the PC sector is that motherboard sales (the heart of the computer) have gone up sharply (month-on-month) in February. It may be a good sign,'' said WestLB Panmure analyst Karsten Iltgen in Frankfurt.
However, at current prices almost all DRAM manufacturers are still loss-making. Only when 64 Megabit DRAM prices reach the $3 level will manufacturers such as Infineon become profitable again.
This did not stop investors trading up the shares. In Europe major chip companies rose sharply on Friday, following Asian and U.S. peers. the FTSE Euro semiconductor index (^FTTXSC - news) was 5.8 percent higher at 508.87 points.
Of the European big three, Infineon gained most, adding 8.3 percent at 42.60 euros, as it is most exposed to the PC market. It hit a 33.70 euros low on March 1 after a 93.70 high in June.
The other two, France's STMicroelectronics and Netherlands-based Philips , the majority of whose products are aimed at the telecommunications and consumer electronics markets, rose by some six percent.
In Asia, South Korea's Samsung Electronics , the world's largest computer memory maker, closed up 8.04 percent, while Hyundai, the world's second largest memory chip maker, added just 35 won at 3,035 won.
In Japan, the largest chip maker Toshiba Corp soared 10.13 percent.
Meanwhile in The U.S., shares of chip giant Intel Corp. (NasdaqNM:INTC - news) rose 12 percent to $28-11/16 and Cypress Semiconductor (NYSE:CY - news) climbed 9.5 percent to $19.92.
NOT EVERYTHING IS ROSY
Offsetting the good news was Thursday's book-to-bill report for the North American semiconductor equipment makers showing shipments outstripped orders by 23 percent.
Even so, semiconductor equipment makers gained ground, led by one of the Nasdaq's most active stocks and sector bellwether, Applied Materials Inc. (NasdaqNM:AMAT - news). Shares rose 10.2 percent or $4-9/16 to $49-7/16.
Netherlands-based ASM Lithography (NasdaqNM:ASML - news), the world's largest stepper and scanner manufacturer, climbed 8.9 percent to 42.95 euros.
Signs from communications semiconductor makers were not good either, and investment bank Robertson Stephens downgraded the sector on Thursday to long-term attractive from buy due to weak demand and excess inventories.
Telecom operators and phone makers have been cutting back investments because of spiralling debt and slower than anticipated customer growth.
``I don't think the communications sector is stabilising. I would sell into it now,'' said Mona Eraiba, principal at New York hedge fund management firm Rosetta Management Group LLC.
But at least the communications business was not deteriorating as fast as it had been, she added. ``Things aren't improving from an order point of view, but the rate of decline has decelerated.''
Lehman Brothers initiated coverage of several communications-related chip stocks with market-perform ratings, noting that it maintained a cautious view on the short-term outlook.
Communications component company Applied Micro Circuits Corp. (NasdaqNM:AMCC - news) gained 22.5 percent, up $4-7/16 to $24-3/16, even after the Robertson Stephens downgrade.
(With Timna Tanners in Los Angeles, 213-380-2014) |
