@Citi Conference
I haven't heard the audio stream yet, but I loaded the new
CITI paper ... not so much infos, but better than nothing.
BTW - I'm wondering, what the fresh NAND PR from Spansion
should show to us? SLC/MLC -> it was not clear to me, to which
products they reference? Overall way too less informations to
get a clearer picture. There are mostly two things, which
SPSN could help in the next time. Costs down and/or Rev. up.
I don't think they could drive operating costs way down, it
should help that Foundrys have a much lesser impact, when we
could ship by our own FABs. And it should help, if CAPEX
payments come down too aggressivly, which should be the case,
which helps our cash side. Thats not "enough", but a first
step. For Revs. its still not clear to me, how ASPs could
develop over the next 2-6 quarters and how marketshare numbers
could develop? Its not clear too, what the overall NOR market
will do and what SPSN plans with NAND-like products and ECORAM.
These are many unknowns. And its still not clear, how NAND
prices will develop? The most "exciting" news up to date is,
that CAPEX plans seems to drop in a VERY sharp way. These
plans could change (of course), but $-numbers for 2009 will
come down significantly and it has to be seen, how Mbit growth
rates will look like, as we enter 2009. Some plans will still
come online, some yield progresses will follow and of course
node migrations will take place. I couldn't estimate fast and
now, how much impact these actions will have for overall 2009?
And its still unknown how much growth we could expect from
the demand side? Many many unknows - many questions, not many
answers. When you ask, the most positive thing for a major
turnaround are the forecasted CAPEX numbers. The more they
will drop, the better it will be as more time will go by.
And btw: these actions (non-actions) will help SPSN too! Why?
Its easy, as fresh money entered the DRAM/NAND companies as
their incomes showed healthy numbers, they could faster node
developments and of course could ramp these aggressivly in
their FABs. The result -> lower costs. As easy node migrations
are over yet and as fresh money will not come into these
companies, these old behaviours will not appear, at least not
in the near future. So this help Spansion to shorten the lag
on the node side and to make 300mm experiance and reach higher
yields, hopefully on 45nm and Quad too. It buys time. Not a
bad thing when you ask me. And what Numonyx is able to reach -
I don't know, all last news seem to point into one direction,
that progress is near non-existant and overall shape looks
more worse than many thought before. Good. Now lets come to
the Citi-paper.
Testing the SOXX 330 Level
An Update from CIR’s Technology Conference
? Tone Is Negative — CIR’s 15th Annual Technology Conference is ongoing. The
mood is decidedly downbeat, reflecting macro-level concerns. Much as we had
expected, chip companies seem reasonably comfortable with 3Q08 consensus
(except for Intersil, who expressed GM concern), but visibility is poor on a
typically back-end loaded quarter and tone from managements is poor. Europe
was a common thread in commentary as a source of weakness.
? PC Weakness Evident — Ingram Micro was standout negative, citing weakness
in PC’s in Europe and Asia. This adds to mix related concerns first evident from
Dell and supported by comments by Micron (who suggested that bit/box growth
is slowing) and Nvidia (who suggested August is slightly below normal). Both
IDTI and Intel have suggested that July and August have tracked very much to
plan, and we therefore conclude that September, as always, is a critical month.
We see risk to AMD, NVDA, and Intel, noting that Intel is least at risk (but not
devoid of risk) given the incremental support from its Atom processor. We also
see risk to MU estimates on worse-than-expected DRAM/NAND pricing.
? Handset Comments Misconstrued — Despite the wide-spread concern, in a
dinner meeting with Qualcomm the company clarified that the CEO’s comments
about replacement rates slowing was taken out of context, referring to a longerterm
natural trend, not quarterly results. Indeed, Spansion and Micron both
suggested that handset volumes are tracking to plan. Meanwhile, unlike in
PC’s, mix in handsets appears to be improving, a function of new handset
model introductions—a point evident in press comments by Compeq. We
conclude that the handset domain seems better positioned than PC’s although
do not believe handsets can escape macro-related weakness.
? Communications Not Excused — While we have generally concluded that
communications has been the least exposed to macro weakness, comments
from Cisco that carrier spending has slowed create risk. We suspect that
unchanged 3Q08 guidance from Altera and flat 4Q08 communications growth
expectations from IDTI may be a function of this slowing. Despite this risk, we
reiterate our position taken in our ALTR mid-quarter preview suggesting
investors buy weakness in ALTR given our confidence in looming spending
from Chinese carriers on ramping 3G networks. We also view Qualcomm as a
solid play on China 3G (license fees and chipsets).
? SOXX Testing 330 — We have previously written that 330 has proven to be a
support level for the SOXX. We expect this level to be tested in coming weeks
as we anticipate a drumbeat of negative news flow (we are in Asia next week
and fear negative data points). ). Continued below...
SOXX Testing 330 (continued) — We are encouraged by MEMC commentary
wafer starts are slowing, suggesting that proactive inventory management is
underway. While this differentiates the current environment from the
2001/2002 timeframe (the last period we broke SOXX 300), we nonetheless
advise investors wait for a better understanding of the current negative
environment before coming back to chip names. We continue to believe that
solid long-term plays are ALTR, QCOM, INTC, and TXN.
Below we provide a summary of comments by various companies at the
conference.
Company Comments
Samsung 3Q08 DRAM ASP outlook lowered, 4Q08 expected to decline 10%. Capex likely to fall in 2009
based on reduced NAND bit expectations.
Micron DRAM ASP’s worse than expected. Worsening mix in PC’s slowing bit/box growth rates. 2009
capex to fall to $1.0B- from $1.5B-$2.0B.
Cypress Macro concerns impacting their view, notably in PC’s. Still comfortable with 3Q08 numbers.
IDTI Visibility is limited although currently tracking to quarterly guidance. AMD slightly ahead of
plan on share gain.
Intersil Expressed concern about 3Q08 gross margin (down 50-100bps versus previous guidance of flat
to down 100bps).
Marvell Revenues tracking inline but backlog starting to shrink.
MEMC Wafer starts slowing reflecting inventory reduction by chipmakers.
RFMD Positive citing solid order trends particularly from China handsets.
Magnachip Q3 sluggish hurt by slowing image sensor business in China
Spansion Demand in handsets tracking to expectations, including mix, helped by customer share gain,
seasonality, and new customers from Numonyx
STMicro Restates 3Q08 outlook, stating that currently tracking inline
Cisco US enterprise stabilizing but US carriers slowing their spending
Corning Lowered outlook citing worsening demand conditions. We note that Japanese TV makers are
pointing to weak US sales and deteriorating mix.
Ingram
Micro July and August below plan due to weakness in Europe and Asia.
CIO Panel 2008 budget reduced reflecting weaker hardware orders. 2009 budget likely to be lower.
China Panel Incrementally more concerned about Chinese consumer demand.
SIA Data Y/Y revenue growth decelerated in July for the first time in 5 months. Gap in production versus
trendline demand is widening.
Highlights from Conference Presentations/Breakouts:
IDTI: IDTI suggested that communications related sales in C4Q08 are apt to be
flat versus C3Q08. Growth therefore needs to come from consumer and
computing. While C3Q08 consensus revenue growth of 4% is inline with
normal seasonal growth, we nonetheless see some risk to C4Q08 estimates
given uncertainty in consumer and computing demand.
SPSN: Spansion remains comfortable with growth targets given: 1) new
customers that looked for a second source post the Numonyx deal; 2) share
gain by their customers (Nokia); and 3) seasonality. We have a healthy dose of
concern given Spansion’s track record. Spansion expects cap-ex to fall to
$40m-$50M by 4Q08, putting them into positive free cash flow.
STM: While the company focused predominantly on their recent JV with EMP
and the implications on their products and market position, they did restate
their 3Q08 guidance, suggesting they are running to plan at the moment. They
further clarified that currency trends to represent an opportunity, although they
were reluctant to rely on this given currency volatility.
TXN: In addressing demand concerns, TI did suggest that Europe was showing
weakness. The company reiterated their stance in wireless (focus application
processor and less so on broadband). Management also expressed confidence
in their long-term margin targets.
NVDA: Dinner with Nvidia suggested that August was slightly below normal.
Given the normally back-end loaded nature of the quarter, the company is not
yet concerned but remains open-eyed for September and October. At this
stage, Nvidia sees mix-related weakness, and has growing concern about unit
weakness. Nvidia did clarify that an additional charge from their recent
materials issues is not forthcoming, noting that they need to pay out their
existing charge (over several quarters) before they can take another charge.
QCOM: At a dinner, Qualcomm clarified that comments made by CEO Paul
Jacobs that “replacement rates had slowed” were taken out of context. Jacobs
was referring to a longer-term trend that Qualcomm has previously spoken of
and was not referencing the quarter. Qualcomm also indicated that negative
comments from the supply chain (LG and Samsung notably) “could be” echoes
of their existing guidance. They continue to view the opportunity in China as
“enormous” and the most “near-term” opportunity they see.
BUGGI |
