Semiconductors . . . Dan Niles at Lehman Brothers recommended "taking some profits" in Intel for short-term traders ahead of the chipmaker's first quarter earnings report. He believes 1st quarter results are in-line with expectations, June quarter revenue guidance is likely to be down 2-3% Quarter over Quarter at the midpoint versus current consensus of down 0.6%; firm also notes that EPS expectations are flat Quarter over Quarter for June versus the +$0.01 earlier in the quarter, but this may also be too high. Maintains Overweight rating and $24 price target.
Thomas Weisel downgraded RF Micro Devices to Attractive from Buy. The firm is saying they do not believe that multiples can materially expand from these levels, even with potential rev upside, before investors have more faith in bottom line improvement.
Thomas Weisel downgraded Broadcom to Attractive from Buy based on: 1) ongoing uncertainty regarding mgmt, 2) the future direction of BRCM's most profitable division, ServerWorks, 3) potential weakness in enterprise markets because of reduced IT spending, 4) potential softness in cable and set-top markets, and 5) valuation.
Legg Mason believes the progress to date points to an upside quarter for Marvell Tech. Firm sees sequential revenue growth potentially exceeding 7-9% guidance. The firm believes it is now likely that MRVL reports revenues exceeding $165 million and EPS of at least $0.18 versus consensus $162.3 million and $0.17. The firm reiterated its Buy rating and $30 target.
The Wall Street Journal reports Advanced Micro Devices and Fujitsu announcing a collaborative accord to integrate its flash memory business setting up a 7,000 employee company. AMD's share will be 60% with Fujitsu garnering the remaining 40%.
Sumitomo agreed to purchase approximately $100 million of Cree's light emitting diode (LEDs) products through Cree's fiscal year ending June 2004 subject to end customer demand.
Semiconductor dollar shipment growth fell sharply to +18% year over year in February from +22% year over year in January, according to data released by the SIA (Semiconductor Industry Association) yesterday. Unit growth also decelerated to +23% year over year from +26% year over year in January. Prices declined 4% year over year, weakening further from the 3% decline in January. February's deceleration in shipment growth is the second consecutive decline since peaking in December at +23% year over year. On a month-over-month basis, shipments fell 3% mom after slipping 2% month over month in January as all geographic regions declined for the third consecutive month. Shipments in the Americas, at --4% year over year, were the first to re-enter negative territory, falling from +3% year over year in January, although shipments in Asia-Pacific also fell by 7 percentage points to 26% year over year from 33% in January. Continue to expect shipments and units will weaken through the first half due to tougher year over year comparisons, and as most end-markets remain soft.
The weak semiconductor shipments data for the first two months of the year, suggest that 2003 is off to a weaker than normal start. Assuming that single- month shipments in March rise 14% over February in-line with the average over the last decade, 1st quarter shipments would be down 4.7% quarter over quarter, which is meaningfully below the average 10-year historical 1.3% quarter over quarter decline in 1st quarter.
The primary culprit for this state of affairs is lack of pricing traction for most semiconductor suppliers. Throughout the 15-month long semiconductor up-cycle from September 2001 through December 2002, ASPs never broke into the positive year over year growth territory, and as mentioned above are now worsening again. Weakening macro indicators such as the ISM's Purchasing Manager's Index, and the Conference Board's Consumer Confidence Index, along with low industry-wide fab utilization, suggest that a meaningful pricing recovery is not likely over the next few months.
Cellular handset component shipments in February were generally weak. Flash shipments declined 6% mom in February, as pricing declined 4% mom and bit shipments fell 1.5% month over month. On a year over year basis, February Flash bit shipments remained unsustainably high, up 140% year over year, but down from 167% year over year in January. DSP shipments fell 1% month over month, as ASPs fell 5% mom. On a year over year basis however, the DSP segment was up 45% year over year and was one of the few to improve from +35% yoy in
January as units grew 48% year over year. DRAM bit growth in February recovered to +32% year over year from January's 20% year over year, clearly helped by very weak pricing -- in-line with commentary from Micron during its recent earnings conference call. As we have noted before, DRAM pricing had been extremely weak through February before stabilizing somewhat in March. According to the SIA's data, blended DRAM prices per megabit fell 20% mom. As a result, dollar shipments fell 8% mom in February, and slowed sharply to +11% year over year from January's +50% year over year. DRAM shipments have been falling since peaking in November at +103% year over year, and will likely continue to fall at least through 1st half 2003---the seasonally weak period for PC sales. Microprocessor shipments also weakened further, falling 4% month over month after declining 3% month over month in January. Dollar shipments also declined to --3% year over year from January's --1%.
The discount to list on Intel processors widened significantly last week by 4 points to 10%. P4 pricing was even weaker with the discount/list growing from 7% to 12%. AMD processor prices dipped only modestly by 2% over the week, however a number of brokers said that trading volumes for high-end Athlons was extremely light; only the Athlon XP1900 and below parts were selling at the normal rate, while supply of the XP2100 was somewhat limited. Most of broker contacts suggested that many customers had adopted a wait-and-see approach in regards to placing new orders, and blamed the war for this. Taiwanese PC manufacturers are also seeing a war related slowdown. According to some press reports, retail orders have declined from both U.S. and European customers. According to SSB Taiwan PC hardware analyst, Kirk Yang, motherboard shipments have slipped for three consecutive weeks, as Asian demand also appears to be slowing. For 1st quarter, he continues to expect a 5% quarter over quarter decline in motherboard shipments. Ahead of Intel's launch of its Canterwood chipset for workstations in mid- April, and the Springdale for desktops a month later, things appear to be heating up in the chipset space. While it appears that no other manufacturer has yet been licensed by Intel to ship 800MHz front side bus and Hyper-Threading compatible chipsets, and it remains unclear when the Taiwanese suppliers will launch chipsets for the highest performance P4s, according to
press reports both VIA Technologies and SiS (Silicon Integrated Systems) expect chipset sales to grow in April. Digitimes reported that both these companies believe supply problems from their foundry partners have been resolved, and new product introductions should further help shipments.
During its Analyst Meeting last week, nVidia management said that they regard the company's chipset business as being the fastest growing segment among its product lines. The company currently ships chipsets only for AMD's Athlon family of processors, and while management said they "would like to" participate in the Intel chipset segment too, no product announcement appears imminent.
DRAM prices were again mixed last week with DDR 128Mb and DDR 256Mb down 2% to $1.65 and $3.06 respectively; SDRAMs were firm with 128Mb up 2% to $2.77 and 256Mb flat at $3.62. SDRAM is now selling at a 18% and 68% premium to DDR at the 256Mb and 128Mb densities respectively.
Channel Checks. DRAM pricing has once again been unusually stable as the world remains focused on the war in Iraq. We have heard some market chatter that Samsung is going to be raising contract prices for the first half of April, at the margin a positive given that contract pricing has been on the decline. Sources indicate that April demand should stay steady compared to March with neither a large drop-off nor a large increase expected. However, if the situation in Iraq gets messy, then computer sales may get pushed out, which would negatively impact DRAM demand. General consensus among our contacts is that DRAM pricing will remain relatively range bound for the next quarter or so until PC demand seasonally upticks in 3rd quarter.
The financial press reported last week that the European Commission and the U.S. Department of Commerce have ruled that Hynix received illegal state subsidies and will so on impose tarriffs of 30% - 35% on all of Hynix's imported products. Industry consolidation is positive for Micron and the remaining DRAM competitors, and this development potentially hinders Hynix even further. However, Hynix is spending capital to raise output at its Eugene, Oregon fab and any output from this facility would be excluded from tariffs. The impact of this ruling is that Hynix will distribute its Oregon fab output in the U.S. and Europe, thus excluding tarriffs in those geographies. The rest of the company's output will be sold into the Asia-Pac spot market, or embedded into finished products in which DRAM tarriffs are again excluded. Thus, expect volatility in the Asia-Pac spot markets to increase while contract prices in the U.S. and Europe firm a bit with less supply flowing into these markets. In our opinion, that Hynix appears in deep financial trouble, but the company has in the past shown a remarkable ability to survive. Do not believe this ruling is enough on its own to bankrupt the firm once and for all, however, the rulings are incrementally positive for Micron.
Other DRAM Weekly News. Samsung Electronics announced that it has begun production of 512Mb DDR II products. Expect DDR II to begin impacting the DRAM market in late 2003 or early 2004.At a technology conference last week, Powerchip Semiconductor management indicated that company's bit production would grow over 100% this year, compared to market growth of 45% - 50%, primarily due to increased output at its 300mm DRAM facility. Digitimes reported that Taiwan's Nanya Technology may ramp its 0.11-micron process technology in Q4'03, a quarter or so earlier than planned. Micron is starting to ramp its 0.11-micron process now, with some material volume planned for 3rd quarter.
Boxmakers . . . Gateway will seek to delay the filing of its 2002 annual report with the U.S. Securities and Exchange Commission until it completes a review of the accounting for bundled AOL Internet services in 2000 and 2001 and for matters related to a previously announced SEC investigation related to 2000 financial statements. The PC maker expects to report a $340 million reduction in full-year 2000 net sales and cost of goods sold (COGS) to $9.3 billion and $7.2 billion, respectively. For 2001, net sales and COGS were reduced by $130 million to $6 billion and $5.1 billion, respectively.
2020insight.com |
