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Silicon Motion Technology Corp. Message Board

  • garmingchan garmingchan Mar 30, 2007 11:33 PM Flag

    IBD Article

    (Relevance is towards the end)

    Flash memory chips will be scarce
    items in the second half of 2007.
    That will drive flash prices sky
    high. Higher prices will hurt everyone
    from Apple to small chip firms
    that supply the flash card market.
    Ornot.
    Analysts and executives in the industry
    are debating whether there
    indeed will be a flash shortage. A
    shortage could have ramifications
    since flash is in such popular products
    as Apple�sAAPL iPod music player.
    It�s true that after a long period of
    sliding prices, flash prices have
    started to rise. In a Tuesday report,
    research firm DRAMeXchange
    says Nand-flash prices rose from
    4%to7%the prior week.
    It says it was the second weekly
    price jump in March, and it blames
    a shortage of flash chips.
    The report has generated some
    fears, but not from everyone.
    �The story of a flash shortage is a
    little overblown,� said W.R. Hambrecht
    analyst Daniel Amir. �Samsung
    has been having difficulty�
    keeping up with market demand
    for Nand-flash chips, Amir said.
    �But we think Samsung�s competitors
    will pick up some of that business.�
    Samsung is the No. 1 maker of the
    type of flash memory chip called
    Nand. Nor is the other type, but
    Nand is the most popular. Micron
    TechnologyMU, Hynix and Toshibaalso
    are makers of flash chips.
    Device makers prize flash. Unlike
    DRAM, or dynamic random access
    memory, the main memory in PCs,
    flash chips retain data even after a
    user turns the device off.
    Micron says it�s ready to take up
    any of Samsung�s slack.
    �Regardless of what the market is
    doing short term, we believe Nand
    is the right place to be,� said Brian
    Shirley, vice president of memory
    at Micron. �We�veclosed the gapon
    process and product technology
    andwe�re in high volume.�
    Analysts saySamsungmaybe having
    trouble getting itsnewchip production
    process up to speed. They
    also say the rollout of some new
    flash-using digital devices, including
    Apple�s iPhone, is causing a
    spike in sales.
    Nand flash goes into flash cards,
    or tiny circuit boards, used in cell
    phones, MP3 music players and
    otherconsumerdevices.PCmakers
    also are adding flash to their computers
    to enable functions like instant-
    on.
    AskedifNandflash is in short supply,
    Jim Elliott, director of flash
    marketing for San Jose,
    Calif.-based Samsung Semiconductor,
    replied, �Yeah, we see a lot of
    momentumin theNandmarket.�
    Elliott says flash prices will rise in
    the second half of the year.
    Asked if Samsung has had to cut
    back on shipments to some small
    flash card makers, Elliott said, �I
    don�tknowaboutthat.Thewayit affects
    us is, demand is strong now.
    Andit will continue to increase.�
    Companies such as Silicon MotionSIMO,
    which makes controllers
    for flash cards, are caught in the
    middle. Controller chips connect
    flash cards to the cell phone, musicplayer and the like. Chief Executive
    WallaceKousays he sees flash prices
    rising.

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    • That could hurt his business, he
      says, because fast-rising prices
      coulddampensales of flash devices.
      Silicon Motion�s per-share profit
      rose steadily in 2006. Its shares
      have risen 82% since July, but they
      fell 13% last week partly on at least
      one report, by Oppenheimer, that
      flash prices rising and flash chips
      are in short supply.
      Kou says he�s worried because
      he�s heard that the big flash makers
      are in short supply.
      �TherehasbeenarumorthatSamsung
      and Hynix have constrained
      capacity of flash,� he said. �It seems
      like we�re starting to see flash prices
      going up. I�m not sure whether it
      will last a whole quarter or halfyear
      or a short period of time.
      �I�m going to Korea and check
      with Hynix and Samsung to see
      what�s going on,� hesaid Tuesday.
      On Thursday, Oppenheimer analyst
      Vijay Rakesh downgraded Silicon
      Motion from buy to neutral. He
      says supply issues mean that if flash
      card makers can�t get enough flash,
      they�ll have less need to buy Silicon
      Motion�s controller chips.
      �Samsung is having manufacturing
      issues,� Rakesh said in an interview.
      �It�s yield issues. They were
      planning to go to 51-nanometer
      (next-generation chipmaking process)
      during the first quarter. Now
      they plan to make the move in third
      quarter. As a result, there�s not
      enoughsupply.�
      But Montgomery analyst Robert
      Adamsdisagrees.
      �To say there�s a fundamental
      issue with supply in the Nand-flash
      base is ludicrous,�Adamssaid. �Capacity
      was artificially manipulated
      to firm pricing during a weak first
      quarter.�
      Such manipulation, to a degree, is
      par for the course in chip production.
      Samsung�s Elliott confirms the
      company shifted some capacity
      from flash toDRAMsbecause profit
      margins onDRAMshad risen.He
      says that�s part of the natural cycle
      in the memory chip game, andNam
      Hyung Kim, an analyst for market
      research firm iSuppli, agrees.
      �Around 5% of the global DRAM
      unit growth (in the first quarter)
      came from a shift from Nand to
      DRAM,� Kim said. �We expect
      until fourth quarter,DRAMmargin
      will surpass Nand.
      �Nand (prices) have hit the bottom.
      I expect they will recover, but
      at what rate we�ll have to wait and
      see.�

 
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