Semiconductor Equipment . . . Taiwan Semi’s overbuilds in 2nd quarter have been somewhat, though not fully, absorbed by better-than-expected demand in 3rd quarter, particularly in the PC space. Having resumed sequential growth in Aug, TSMC’s sales should continue to improve Month over Month in September and October. Overall for 4th quarter, look at 4% Quarter over Quarter revenue growth, vs -4% previously. However, continue to be concerned about orders for the second half of 4th quarter. expect TSMC’s order momentum to be maintained in the first half of 4th quarter. PC graphics are expected to hold up, core logic should continue to grow, and flat-panel ICs should stabilize after weakening in 3rd quarter. In communications, see continued strength in handset and gigabit Ethernet ICs, and for consumer electronics, digital camera, DVDplayer and game console ICs will be the main demand drivers.
Semiconductors . . . Micron is scheduled to report fiscal 4th quarter 2003 results on Wednesday 9/24 after the market close. Analysts are forecasting revenues of $917 million (up 25% Quarter over Quarter) and GAAP EPS of $(0.23), based on sequential DRAM bit shipment and ASP
growth of 8% and 17% Quarter over Quarter respectively. Note that we have included a $60mn inventory benefit for the quarter without which our EPS would be lower by $0.10, or a loss of $(0.33) per share. Latest checks with DRAM module makers and spot market brokers point to no real improvement in the inventory level, which continues to be on the high side. The market appears unanimously pessimistic on near-term spot pricing, and the downward pressure is expected to continue through the end of September and early October as distributors and module makers continue to sell stockpiled inventory. Resisting the softness in the spot market, contract prices have been flat to marginally up in September, and the price gap between spot and contract has gradually widened to more than 10% currently. Based on historical trends, do not expect such a high premium level to be sustainable, and the spot price weakness is likely to lead to greater price resistance by PC OEMs in contract negotiations.
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