DRAM contract prices set to continue rising

http://www.digitimes.com/news/a20130128PD217.html

With some DRAM vendors reportedly quoting their 4GB DDR3 modules at more than US$20, higher than the current contract price level, contract prices for commodity memory are set to rise through February, according to industry sources.

Contract quotes for 4GB DDR3 modules came at between US$17 and US$17.50 in the first half of January, DRAMeXchange data shows. A combination of supply-side factors, such as a cutback in production of PC DRAM and more capacity allocated for mobile DRAM and server-use memory, lifted the early January quotes by almost 10%.

DRAM contract prices will continue their upward trend in February, driven mainly by the supply side, the sources indicated. Thanks to the price rally, suppliers that remain in the red will have a good chance of returning to profitability in 2013, the sources believe.

Inotera Memories, for instance, is expected to swing to profits in the second quarter of 2013, the sources said. Inotera reported net losses of NT$3.72 billion (US$128 million) for fourth-quarter 2012, which marked the 12th straight quarterly loss for the company.

Inotera has revealed plans to shift a majority of its total wafer starts to 30nm process technology by April, and the ramp-up will help improve company cost structure.

Fellow DRAM firm Nanya Technology recently remarked that the company's revised partnership with Micron Technology will help significantly reduce its R&D expenses. The firm is also looking to complete its technology transition to a 30nm process by the end of the third quarter to further lower its manufacturing cost.

Nanya is set to gradually be phased out from the commodity DRAM chip market with plans to discontinue supplying commodity chips to clients by mid-2013., the firm disclosed.

Nanya generated net losses of NT$8.88 billion in the fourth quarter of 2012 - also the 12th straight quarterly loss for the company.

Semiconductor inventory reaches record levels

Revenues to decline in Q1, rebound expected by Q3

http://news.techeye.net/chips/semiconductor-inventory-reaches-record-levels

 

Chip inventories reached record highs near the end of 2012, and according to IHS iSuppli, semiconductor revenue will decline in Q1, prompting new concerns about the state of the market.
Overall semiconductor revenue is expected to slide three percent between January and March 2013, on top of a 0.7 percent decline in Q4 2012. What's more, inventory reached record levels in Q3 2012, amounting to 49.3 percent of revenue, more than at any point since Q1 2006. IHS iSuppli believes the uncomfortably high level of inventory points to the failure of key demand drivers to materialise.
The PC market remains slow and hopes of a Windows 8 renaissance have turned into a nightmare. Bellwether Intel saw its revenue drop three percent in Q4, with profit tumbling 27 percent, and the trend is set to continue. AMD is expected to announce its earnings Tuesday afternoon and more gloom is expected across the board. The only bright spot in an otherwise weak market is TSMC, which quickly rebounded after posting the lowest revenues in two years a year ago. TSMC now expects to see huge demand for 28nm products in 2013 and many observers point to a possible deal with Apple.
In addition, TSMC plans to invest $9 billion in capital expenditure in 2013, and it will likely spend even more in 2014, as it moves to ramp up 20nm production. However, Intel's plans to increase capital spending to $13 billion, up $2 billion over 2012 levels, have not been welcomed by analysts and investors. Unlike TSMC, Intel is not investing to increase capacity in the short term, it is making a strategic bet on 450mm wafer technology, which promises to deliver significantly cheaper chips compared to existing 300mm wafers. However, 450mm plants are still years away.
TSMC's apparent success has a lot to do with high demand for smartphones and tablets, which are slowly eating into the traditional PC market. Semiconductor shipments for the wireless segment were expected to climb around four percent in 2012 and positive trends were visible in analog, logic and NAND components. However, the mobile boom can't last forever, and we are already hearing talk of "smartphone fatigue" and "peak Apple".
IHS iSuppli estimates the first quarter of 2013 will see growth in industrial and automotive electronics and other semiconductor markets will eventually overcome the seasonal decline, so a rebound is expected in the second and third quarters.
Semiconductor revenue could grow by four percent in the second, and nine percent in the third quarter. However, the assumptions are based on a wider economic recovery, which is anything but certain at this point. If demand evaporates, semiconductor suppliers could find themselves hit by an oversupply situation, leading to more inventory write-downs throughout the year.


Read more: http://news.techeye.net/chips/semiconductor-inventory-reaches-record-levels#ixzz2IkDvMFYT

Intel Girds for Third Quarterly Sales Decline on PCs Slump: Tech

http://www.bloomberg.com/news/2013-01-17/intel-fourth-quarter-profit-tops-estimates-on-slower-production.html

Intel Corp. is girding for a third straight quarter of falling sales, highlighting the chipmaker’s struggle to adapt in a world swiftly embracing mobile devices and leaving behind the personal-computer industry it dominates.

Sales in the current period may decline, Intel said yesterday, after reporting a 3 percent drop last quarter. That followed a 5 percent slide in the September quarter. The shares fell the most since May 2010.
Intel plans to spend about $13 billion on new plants and equipment in 2013, more than analysts had projected, to help it cater to growing demand for handsets and tablets. The effort won’t quickly help the Santa Clara, California-based company compensate for diminishing demand for PCs.
“They are definitely coming from behind and their market is moving away from them,” said Patrick Wang, an analyst at Evercore Partners. “They are trying to breathe some life into the PC market.”
Intel, whose microprocessors run more than 80 percent of the world’s PCs, is struggling as that market faces a second straight year of lower sales, according to analysts at JPMorgan Chase & Co. In mobile chips, Intel is playing catch-up to Qualcomm Inc.
Intel yesterday reported sales of $13.5 billion last quarter, matching the average prediction of analysts, according to data compiled by Bloomberg. Net income fell to $2.47 billion, or 48 cents a share, compared with 45 cents projected by analysts.
“I don’t think things get better in PCs,” said Cody Acree, an analyst at Williams Financial Group in Dallas. For growth in the PC market this year, “you’re talking zero to how badly are you down.”

2013 Projections

Intel fell 6.3 percent to $21.25 at the close in New York, the steepest decline since January 2009. The stock dropped 15 percent last year, compared with a 13 percent gain in the Standard & Poor’s 500 Information Technology Index. Advanced Micro Devices Inc., Intel’s main competitor in PC processors, declined 10 percent to $2.46.
Intel’s sales this year -- the last for Chief Executive Officer Paul Otellini -- will barely budge. First-quarter revenue will be $12.7 billion, plus or minus $500 million, the company said. That compares with an average analyst projection of $12.9 billion. Gross margin will be about 58 percent. A year earlier, sales were $12.9 billion, while gross margin was 64 percent.
For 2013, Intel said revenue will increase by a “low single-digit percentage.” Analysts had predicted that sales would rise about 2 percent to $54.4 billion this year.
Otellini plans to retire in May, and the company is searching for his successor.

‘Gigantic Number’

To help it meet demand for chips, Intel said it will spend $13 billion, plus or minus $500 million, on new equipment and new plants -- also known as fabs -- in 2013.
That number, which compares with an average analyst estimate of $9.99 billion, raises questions about how the chipmaker will be able to fund such an expansion while maintaining dividend and share buybacks from the cash it generates, said Daniel Berenbaum, a New York-based analyst at MKM Partners.
“It’s a gigantic number,” said Berenbaum. “It’s not like their fabs are full now.”
About $2 billion of the increase in spending this year will go to building a research facility for a forthcoming type of plant that processes 450-millimeter silicon wafers. When that goes into production, it will help increase the number of chips the company can get from each production run.

Data Center

Under Otellini, Intel has been able to compensate for part of the PC malaise by catering to buyers of servers, which outfit data centers. Revenue in Intel’s data center group rose 4 percent to $2.8 billion in the recent period, compared with a 6 percent decline in its main PC-chip business.
Intel expects demand from companies to drive a return to low-double-digit percentage growth for the data-center business, Chief Financial Officer Stacy Smith said.
Intel has “modest” expectations for growth in the PC industry, and is betting new chips going into tablets and slimline laptops it calls Ultrabooks will catch the attention of consumers.
That will translate into reinvigorated demand in the second half of the year, Smith said in an interview.
“We expect some unit growth in the back half of the year and into 2014,” he said. “We’re putting in the factory capacity to support that.”

Margin Compression

While Intel has won some orders from phone makers for its chips, that business won’t “move the needle” for the whole company until next year, when its customers bring handsets featuring so-called long-term evolution high-speed data links to market, Smith said.
PC shipments fell 4 percent in 2012 and will slide a further 1.5 percent this year, JPMorgan analysts estimate. Tablet unit sales, by contrast, rose 72 percent last year and will surge 54 percent this year, they project.
Fourth-quarter gross margin, the percentage of sales left after subtracting production costs, was 58 percent, compared with an average analyst estimate of 57 percent. A year earlier, gross margin was 65 percent.
Intel’s results kick off two weeks of earnings reports from the largest U.S. technology companies. Because its chips power the majority of the world’s PCs, investors watch Intel’s earnings for a broad indication of demand for desktop, server and laptop computers.
The company’s biggest customers are PC makers Hewlett- Packard Co. and Dell Inc., which together contribute more than 30 percent of revenue, according to a Bloomberg supply-chain analysis.

DRAM contract prices soar in 1H January

http://www.digitimes.com/news/a20130117PD218.html

Contract prices for DRAM have risen about 10% in the first half of January, with 4GB modules quoted at as high as NT$17.50, according to DRAMeXchange.

Early January contract quotes for 2GB and 4GB DDR3 modules averaged US$9.75 and US$17.25, respectively, up 8.3% and 9.5%, DRAMeXchange disclosed. Average prices for 2Gb chips came to US$0.92 during the period, rising 10.8%.

Japan- and Taiwan-based DRAM makers continue to cut back their production of PC DRAM, while Korea-based vendors shift more PC DRAM capacity to non-PC memory chips, industry sources revealed. With the overall output slowing down, prices for commodity memory have gone up recently, the sources said.

Supply-side factors will continue to boost prices for PC DRAM until early February, the sources predicted. And if demand picks up, prices are expected to stage a solid rally, the sources indicated.

At the spot market, prices for 2Gb DDR3 chips have rebounded to US$1.20-1.30 recently, the sources observed.