<Well here's a little positive news for broomriders with severely splintered Buttocks.>
Headline: Semiconductors: Chip Price Survey
Author: M. A. Gumport, CFA 1(212)526-5368/C. Gangi -3754
Rating:
Company: AMD,ALSC,AVT,IDTI,INTC,IRF,LSCC,LSI,MU,NSM,PIXT,RMTR,STM,TXN,VTSS,XLNX
Country: IND CUS
Industry: SEMICO
Today's Date : 12/12/97
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* WEEKLY CHIP PRICING UPDATE: DEAD CAT BOUNCE? DRAM PRICES FLATTEN.
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DRAMs DO THE DEAD CAT BOUNCE? PRICES FLATTEN. It would be very optimistic
to call this last week's action an uptick. Still, fact is that a variety of
DRAM configurations, after a plunge of 20-50% during the past month, actually
were flat or slightly higher during the past week.
PROCESSORS: K6-233 PRICE DOWN (MORE SUPPLY); DITTO ON PRICE FOR THE PENTIUM-2-
233. As recently reported, AMD-$18 11/16-1 has resolved its yield problems on
0.35 micron parts and now is rapidly ramping its K6-233. K6-233s at $254
still sell above list in the spot market for small quantities, but prices were
down 15% last week, and that seems to reflect increased supply more than any
problem with demand (still seeing a very favorable reception for the part).
We note the Pentium-2-233 at $383 fell 7% last week and small quantity spot
prices are now slightly below listed volume prices. We think the Pentium-2
price downtick is a tit-for-tat/take this for that case of competition.
OVERVIEW - STILL BAD NEWS NEAR TERM: 1) DECELERATION, 2) ASIA/PACIFIC.
EXPECT TURNAROUND IN EARLY 1998 WITH ACCELERATING GROWTH THROUGH THE YEAR. We
continue to see 2 short term themes: 1) Deceleration, 2) Asia/Pacific.
Deceleration is apparent in NSM's ($26 3/8-1) slowdown from 40% to 8% year-over-
year order growth Aug. - Nov. (or the peaking of worldwide IC unit growth
at 35% last July). Asia/Pacific's impact is apparent directly in the
bankruptcy of LSCC's ($55 5/16-1) key disti. in Korea and indirectly in the
flood of low priced DRAMs as sales to Asia/Pacific are redirected to the U.S.
With 30% of chip industry sales coming from Asia/Pacific, it might be
appropriate to just take a hatchet to projections and cut them by 30-50%, but,
in fact, we already have grown progressively more cautious in recent months,
our projections are already near the bottom of consensus, and we feel they are
generally ok with only selective, ongoing downward revisions necessary as
the size and timing of the impact is more apparent.
LONGER TERM: THIS IS A MAJOR BUYING OPPORTUNITY. Mexico was supposed to die
a couple of years ago (and threatened U.S. health, too). The outcome has been
entirely different. Now Asia/Pacific is supposed to shrivel and bring the
U.S. down too. To the contrary, we believe the dramatic price/performance
improvement in chips helped by renewed competition plus the takeoff of key new
products (DVD) will help the industry enjoy accelerating growth throughout
1998 after a disappointing 4Q97 experience. Now is the time to sort between
chip makers for those with the best longer term stories. WHILE CHIP STOCK
PRICES LIKELY WILL STILL BE DECLINING SHORT TERM, NOW THROUGH EARLY 1998
APPEARS AN OPPORTUNITY TO ESTABLISH MAJOR POSITIONS AT VERY ATTRACTIVE PRICES.
Disclosure Legend: A-Lehman Brothers Inc. managed or co-managed within the
past three years a public offering of securities for this company. B-An
employee of Lehman Brothers Inc. is a director of this company. C-Lehman
Brothers Inc. makes a market in the securities of this company. G-The Lehman
Brothers analyst who covers this company also has position in its securities.] |
