Asked if Nand flash is in short supply, Jim Elliott, director of flash marketing for San Jose, Calif.-based Samsung Semiconductor, replied, "Yeah, we see a lot of momentum in the Nand market."
Elliott says flash prices will rise in the second half of the year.
Asked if Samsung has had to cut back on shipments to some small flash card makers, Elliott said, "I don't know about that. The way it affects us is, demand is strong now. And it will continue to increase."
Companies such as Silicon Motion (NasdaqGM:SIMO - News), which makes controllers for flash cards, are caught in the middle. Controller chips connect flash cards to the cell phone, music player and the like. Chief Executive Wallace Kou says he sees flash prices rising.
That could hurt his business, he says, because fast-rising prices could dampen sales of flash devices.
Silicon Motion's per-share profit rose steadily in 2006. Its shares have risen 82% since July, but they fell 13% last week partly on at least one report, by Oppenheimer, that flash prices rising and flash chips are in short supply.
Kou says he's worried because he's heard that the big flash makers are in short supply.
"There has been a rumor that Samsung and Hynix have constrained capacity of flash," he said. "It seems like we're starting to see flash prices going up. I'm not sure whether it will last a whole quarter or half-year or a short period of time.
"I'm going to Korea and check with Hynix and Samsung to see what's going on," he said Tuesday.
On Thursday, Oppenheimer analyst Vijay Rakesh downgraded Silicon Motion from buy to neutral. He says supply issues mean that if flash card makers can't get enough flash, they'll have less need to buy Silicon Motion's controller chips.
"Samsung is having manufacturing issues," Rakesh said in an interview. "It's yield issues. They were planning to go to 51-nanometer (next-generation chipmaking process) during the first quarter. Now they plan to make the move in third quarter. As a result, there's not enough supply."
But Montgomery analyst Robert Adams disagrees.
"To say there's a fundamental issue with supply in the Nand-flash base is ludicrous," Adams said. "Capacity was artificially manipulated to firm pricing during a weak first quarter."
Such manipulation, to a degree, is par for the course in chip production. Samsung's Elliott confirms the company shifted some capacity from flash to DRAMs because profit margins on DRAMs had risen. He says that's part of the natural cycle in the memory chip game, and Nam Hyung Kim, an analyst for market research firm iSuppli, agrees.
"Around 5% of the global DRAM unit growth (in the first quarter) came from a shift from Nand to DRAM," Kim said. "We expect until fourth quarter, DRAM margin will surpass Nand.
"Nand (prices) have hit the bottom. I expect they will recover, but at what rate we'll have to wait and see."
Copyright 2007 Investor's Business Daily, Inc. |
