you:
Keep in mind that the costs of SP1 (costs of sales + depreciation) will hit the income statement, which will offset some or all of the $50m.
But the difference is that depreciation is a non-cash item, while paying TSMC is a cash item. So cash generation is going improve, but full P/L impact is still unknown.
me:
Yeah, q1 is going to be a problem due to the added depreciation, but by q2 we will start to see the extra production capacity being reflected in sales. It wont be until q3 that we see the full effects of the 2k WSPW being reflected in sales due to the production lag.
Besides the 65nm/300mm advantages SP1 bings we will be seeing the effects of a partial BIST implementation on costs. Testing costs now are typically running 30% of total costs for flash producers and BIST should help a lot. Not only that but 65nm allows much higher densities which should allow SPSN to go where it hasn't been able to go before as far as larger capacity chips goes. These high end chips are going to have a very positive effect on ASPs in both of SPSN's market segments. SPSN has said that they are giving up low-end business where they can't make money and this should also help ASPs dramatically.
Overall, given MirrorBits inherent production cost advantages(40% fewer critical manufacturing steps compared to floating gate) along with the new capacity, reduced testing costs, higher average ASPs and continuing reductions in costs at fab25 it's hard to see how any of SPSN's competitors have a chance at selling anything, but then what do I know?
Yeah, EBITDA should take off in q2, but that's only a small part of the increasingly rosy outlook. Even q1 EBITDA should be good unless the macro markets are in the toilet. In that case the other producers should be hurting a lot more than SPSN. |
