Next year Hynix will navigate a transition
toward 12' from 8' capacity, a significant shift that looks
set to begin in earnest in 1H08 (from ~80% of NAND output
on 8' exiting C07 to <20% exiting C08), sharply curtailing
C08 supply growth until 2H. Recall about 90% of SNDK's
supply will be produced on lower-cost 12' wafers exiting
2007.
If I recall correctly 2/3 of Hynix capacity is @ 200mm (I recall Sammy @35%).
Cit's chip analyst seems to be aware of the 200mm/300mm situation while the Citi's SCE analyst kind of ignores the fact.
But probably only a few die hards follow Hynix - including the SNDK.
This is great data for us small fish investors - JMHO
To: Pam who wrote (36881) 7/27/2007 10:43:56 AM
From: Sam of 36882
Citi comments on Hynix, NAND, Sandisk
SanDisk Corp (SNDK)
Mixed NAND Implications from Hynix Results and Outlook
* NAND Newsflow Persists - Thursday's Hynix (000660.KS,
Choi) (~20% global NAND supply) results offered forward
looking implications for NAND fundamentals and SanDisk
investors.
* Hynix 2Q07 Looks Benign - Shedding light on tight mid-yr
fundamentals, bits shipped actually FELL qq (60nm yield
issues, 1Q07's NAND shift to DRAM), squeezing the company's
end-Q inventory to 1 wk. Pricing jumped 25%.
* But 2H07 More Aggressive - Off 1H07's lower base, Hynix
expects 100% 3Q07 bit growth (limited DRAM wafer shifts,
new NAND wafers, finer geometry), and flat 3Q pricing from
end-July (but a price decline overall on three factors: 1)
a mix shift to contract mkts, 2) contract buyer price
discounts, and 3) higher avg density mix). Further out, the
company expects FY07 bit growth of ~155% (we had expected
~135%).
* Expected 2008 Bit Growth Decelerates Sharply - Hynix
foresees ~120% bit growth in 2008 (we expect industry avg
of ~140%). Next year Hynix will navigate a transition
toward 12' from 8' capacity, a significant shift that looks
set to begin in earnest in 1H08 (from ~80% of NAND output
on 8' exiting C07 to <20% exiting C08), sharply curtailing
C08 supply growth until 2H. Recall about 90% of SNDK's
supply will be produced on lower-cost 12' wafers exiting
2007.
* Mixed NAND Implications Overall - While naturally
concerned with implications of 3Q's bit growth bogey on the
mid-to-late 4Q07 supply/demand balance, our caution is
tempered by the following factors: 1) fieldwork indicating
robust 3Q07 tier-1 OEM demand at Hynix, 2) indications
tier-2/3 product players are on allocation until Nov, 3)
the looming pre-holiday build, 4) the encouraging sign of
supply growth deceleration next year, and 5) the potential
for upcoming manufacturing transitions for industry to
proceed slowly (like 1H06) limiting supply growth.
* Reiterate Buy on SNDK Shares - Buy-rated SanDisk remains
a high-conviction top pick with 25% upside to our $71
target. Valuation looks benign (19x CIR 08E) while drivers
to the next leg up in the shares include: 1) Meaningful
positive Street EPS revisions in 2H07, 2) new product
activity (AAPL, others) in 3Q07, 3) favorable 2H07 contract
pricing trends, and 4) handset demand following early-1Q08
CES and 3GSM launch activity. |
