From this weeks Barrons: (for personal use only)
Micron Technology shares have managed to avoid the stock market's recent carnage. Micron, in fact, has risen well over 50% since mid-June, last week gaining 15/16, to 34 1/4 .
The rise reflects a spreading Wall Street view that prices of memory chips, in particular DRAMs, have finally stabilized, and have begun to show signs of recovery. Unfortunately, it's not true.
Jim Handy, memory-market analyst for Dataquest, contends that conditions in the DRAM market remain "miserable." Spot market prices for memories, he says, remain below contract prices, which suggests continued excess.
Says Handy: "Prices are not headed up." He notes that Micron at the moment does have the advantage of being the leader in 16-megabyte memories operating at 100 megahertz, which are required for use with certain new Intel parts. Pricing for those chips, Handy says, has been better than for comparable slower parts operating at 66 MHz.
The better pricing for the faster memories, he feels, reflects the fact that Micron's rivals have been slow to produce comparable chips. Handy, though, says other DRAM makers are "very close" to entering the market, which is likely to pressure prices on those particular chips. Says Handy: "I suspect this could be a very short-lived victory for Micron."
Meanwhile, Handy thinks that overall DRAM capacity remains about 20% too high. Barring additional plant closings, he says, overcapacity will continue into the year 2000.
Lily Wu, a Hong Kong-based analyst with Salomon Smith Barney, notes in a recent report that DRAM makers have been accelerating the pace of "die shrinks"; in other words, they're making chips with smaller lines, increasing the number of parts they can produce from each silicon wafer. She contends that DRAM makers can now get 400 64-MB memory chips from an 8-inch wafer which nine months ago would have provided only 150 chips.
Wu also observes that DRAM capacity will be further expanded by Micron's plan to upgrade the production lines it's acquiring from Texas Instruments. She writes: "We expect neither the DRAM fortunes nor DRAM equipment sales fortunes to improve until 2000 at the earliest." |
