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To: southtech who wrote (52500)3/24/2012 8:31:19 PM
From: clean86
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From: Sam3/25/2012 1:00:17 PM
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1HMar. Mainstream NAND Flash Contract Price Mostly Flat, Demand Main Factor Influencing Quarter-End Effect

According to DRAMeXchange, a research division of TrendForce, mainstream contract price was mostly flat in 1HMar., with some average contract prices showing a slight decrease. Impacted by the quarter-end effect for U.S. manufacturers, 2HFeb. average contract price fell by approximately 5-10% compared to 1HFeb. Although the quarter-end effect has passed, market demand was weak in 1HMar., resulting in relatively high stock levels for memory card and UFD clients. With little sign of demand recovery in the near future, purchasing momentum is weak and few deals have gone through, causing the generally flat contract price trend for 1HMar. TrendForce indicates, as most contract deals will be conducted in 2HMar., the price trend will be clearer in the second half of the month.

As for the end of March and the rest of 2Q, TrendForce believes the main factors that will affect the NAND Flash market will stem from demand changes:

1.) As retail sales were weaker than expected during the Chinese New Year holiday, a portion of leading memory card and UFD vendors adopted more conservative price cut strategies to stimulate demand in the off-peak sales season. The retail memory card and UFD markets remain sluggish, reflecting the effect of the weak sales season on digital cameras and consumer electronics. Furthermore, Intel’s postponed release of next-generation processor Ivy Bridge delays demand stimulation from USB 3.0, which is natively supported by the new platform. Therefore, memory card and UFD shipments will see slow growth in the short term, and promotional sales strategies will play an important role in the stimulation of purchasing momentum.

2.) As for system product demand, the 2012 Mobile World Congress saw the unveiling of the new iPad, as well as other new smartphone and tablet models with high-performance processors and upgraded hardware specifications. Most of the next-generation products are expected to hit the market in March or April, which will benefit NAND Flash demand. Furthermore, Intel’s delayed release of the Ivy Bridge processor pushes back the introduction of a portion of new Ultrabook models. As smartphone retail sales are not expected to pick up until 3Q, system products will provided limited benefit to NAND Flash demand in the near future.

As for the supply side, major NAND Flash suppliers have adopted more moderate wafer expansion plans due to conservative economic outlook. Additionally, yield rate on the 20nm process, which entered mass production in 4Q11, has not improved. Therefore, output increases will be limited. However, the output ratio is expected to begin climbing in 2Q, as the 20nm yield rate is gradually raised. Meanwhile, 20nm-class eMMC and SSD products will begin hitting the market in 2Q – the system product shipments will benefit demand. TrendForce continues to hold a conservative view of the NAND Flash market in the short term, and expects the gradually declining mainstream NAND Flash contract price trend will not change anytime soon.

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From: Sam3/25/2012 4:12:30 PM
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Micron reportedly offers US$1.5 billion to take over Elpida
Josephine Lien, Taipei; Jessie Shen, DIGITIMES [Wednesday 21 March 2012]

Elpida Memory reportedly plans to release its control over the company to a new management team that will come from an open bid, and industry sources have speculated that Micron Technology has offered US$1.5 billion to take over the Japan-based DRAM maker.

In addition to Micron, Toshiba and Globalfoundries are also among the most likely bidders for Elpida, which filed for bankruptcy in February 2012, the sources claimed. Micron has appeared as the first to make an offer, which the sources consider as a move to find out levels of acceptable prices for both seller and buyer.

The speculation came after a Nikkei report indicated that several companies headquartered in the US, Japan and Taiwan were considering bids for Elpida, including Micron, Intel, Toshiba, TSMC and Formosa Plastics Group. Under a new capital structure, Elpida will restructure its management team, according to the report.

These potential buyers are scheduled to enter the first round of bidding for Elpida later in March, and the second round in April, with some decision to be made by May, Nikkei reported.

Globalfoundries was once speculated as a likely buyer for Elpida's 12-inch wafer fab in Hiroshima, according to previous reports. Speculation also rose previously that Globalfoundries would be involved in the Japan government's push to merge the operations of Renesas, Fujitsu and Panasonic, and as a foundry partner of the merging company, Globalfoundries would take over Elpida's Hiroshima factory.

In addition, Elpida and Toshiba had been in integration talks, led by the Japan government, previous reports quoted industry sources as saying. However, the talks have come to a standstill as Toshiba only agreed to take over Elpida's mobile DRAM technology and assets, according to the reports.

Digitimes Research analyst Nobunaga Chai commented that Elpida's debts and assets unrelated to mobile DRAM products will be the issue any buyer should consider. For development of the Japan semiconductor industry, the best-case scenario is that Toshiba combines its NAND flash expertise with Elpida's DRAM capacity and technologies, Chai suggested. Integrating CPU, GPU, NAND flash and mobile DRAM chips into one chip – the so-called "total solution" – will be a trend Japan does not want to miss out, Chai said.

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To: Sam who wrote (52503)3/25/2012 4:23:55 PM
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Micron's NAND comments from the CC:

So first of all, Micron's partnership with Intel on NAND Flash is, of course, a very important relationship for us as well as a significant piece of our business. As many of you are aware, we reached definitive agreements this quarter to restructure or rejuvenate that partnership. And as part of that process, we agreed to purchase Intel's share of the output from the jointly-owned NAND operations in both Manassas, Virginia, and IMFS Singapore.

The purchase capacity was roughly 30,000 wafers per month, and Micron will sell a portion of those wafers back to Intel under a for-profit take-or-pay supply agreement. The incremental profit, along with -- the incremental profit capacity, along with the completion of the initial ramp of the new fab in Singapore, will lead to structural margin improvement going forward.

The life of the remaining joint venture facility, which is in Lehigh, Utah, was extended to 2024. And the scope of our technology relationship was expanded to include certain memory technologies beyond the floating gate and NAND products we had historically been working on together. So I think in summary, both partners consider the relationship to date highly successful and were both very excited to be carrying this relationship on in the future.

On the technology development front, we had a strong quarter. We were excited to complete the construction of the new addition to our R&D cleanroom in Boise, Idaho, and begin installing tools there to support our leading-edge NAND, DRAM, NOR and phase-change memory nodes as well as a number of interesting, new emerging memory technologies. We made good progress on our next 2 NAND technology nodes in the development fab, and our -- as well as our 20-nanometer DRAM node. We also made progress scaling up to 300-millimeter substrates on our 45-nanometer NOR process and in developing a new 300-millimeter phase-change memory process. Moving forward, we look to deploy both of these new 300-millimeter NOR and phase-change processes in the manufacturing fabs over the next year.

In manufacturing, we had a nice quarter relative to production ramp and yield execution. I'm sure Ron will comment in more detail shortly, but a couple of highlights to note are the completion of the ramp to roughly 70,000 wafers per month of IMFS in Singapore and the 30-nanometer DRAM node introduction and successful early ramp at Inotera. We also had good early yield learning -- sorry, we also had good early 30-nanometer yield out of the DRAM fab in Singapore. So in aggregate, we now have successful transfer of that 30-nanometer node into all Micron DRAM fabs. Additionally, it's worth noting that we can now ship 20-nanometer NAND out of all 3 Micron NAND fabs, the 2 wholly owned ones as well as the joint fab in Lehigh. Overall, we had strong bit growth and cost reduction in both NAND in DRAM during the quarter.

Switching now briefly to markets and our products. The second quarter was obviously a weaker environment for pricing than we would have liked. Mark Adams, I think, will likely comment more in Q&A, but seasonal factors, combined with supply chain disruptions due to the Thailand flooding, as well as, I think, general slower economic activity all had an impact.

Recently, we're seeing improvements in the DRAM market. And while we don't predict what's going to happen going forward, depending on application, I think concerns over supply seem to be having a positive or at least stabilizing effect on OEM pricing.

For NAND, the mix of high-density 2- and 3-bit-per-cell as well as seasonal demand weakness drove our ASPs lower during the quarter. While we were able to offset most or all of this with cost reductions, we did suffer some degradation of NAND margins due to sell-through of Mnemonics legacy NAND products, which had been purchased in the market at market prices. Overall, we see generally healthy supply and demand outlook for NAND moving forward as measured by -- as measured industry fab ramps are offset by anticipated demand growth in a number of key markets like smartphones, tablets and SSDs.

Wireless NOR, on the other hand, volumes continue to decline in the wireless space with the transition from feature to smartphones. Embedded NOR, however, remained strong, and we see long-term attractive margins and share gain opportunities in that space.

In the product area, highlights for the quarter include continued success with Hybrid Memory Cube enablement and design and activities across high-performance computing, including high-end server applications as well as across networking; good success with all 3 design wins across a number of different networking companies; strong design and activity of embedded NOR in both automotive and amusement markets. Additionally, relative to NOR, we're now shipping the industry's broadest portfolio of SPI NOR products.

We saw good growth in mobile DRAM bit shipments, in roughly 20% range, and we're seeing early signs of design and acceleration given some of the challenges some of our competitors are facing.

Finally, in NAND during the quarter, we shipped [indiscernible] samples of our 3-bit-per-cell, 20-nanometer, 128-gigabit NAND Flash to enabling controller vendors; we shipped over 0.5 million solid-state drives; and finally, we were prominently endorsed by both EMC as a preferred partner for PCI SSDs and our VFCache product, as well as by Dell for their PowerEdge servers with the Express Flash PCIe SSDs.


Trade NAND bit sales to Micron customers grew 36% in the second quarter, primarily as a result of a higher level of production from IM Flash Singapore quarter-over-quarter as that operation performed at its targeted level for substantially all of the second quarter. Our volume mix of MLC versus SLC NAND in the second quarter was consistent with the first quarter. Production costs per bit for trade NAND products decreased 18% in the second quarter compared to the prior quarter, primarily due to the higher production volumes on advanced technology nodes in the period.

Margins on trade NAND products decreased slightly in the second quarter. However, selling prices declined more than cost -- the cost reductions. Quarter to date for the third quarter, selling prices for tradeNAND products are down mid-20s compared to the average for the second quarter.

DRAM revenues have been fairly flat for the last 2 quarters as higher bit sales have been offset by decreases in selling prices across both periods. Specifically, in the second quarter, per-bit DRAM selling prices decreased 16% compared to the first quarter. This decrease was impacted by both market price declines and a somewhat lower mix of specialty products sold in the premium markets in the quarter. DRAM bit production and bit costs in the third quarter are expected to be down a couple of percent as we shift mix to maximize margins. Quarter to date for the third quarter, selling prices are relatively flat compared to the second quarter average.

Sales of SSDs, including NAND components sold to fabless SSD manufacturers, grew about 15% quarter-to-quarter as these devices continue to gain acceptance in the marketplace.


David M. Wong - Wells Fargo Securities, LLC, Research Division

On your supply agreement with Intel, can you tell us how long the supply agreement lasts for? And is it for fixed wafer prices? Or do the prices move with market NAND prices?

Ronald C. Foster

This is Ron, David. The supply agreement with Intel is set up so that it's a fixed amount of volume. And we have a profit margin built into the agreement, and it's set up to extend for a number of years into the total agreement period.


James Schneider - Goldman Sachs Group Inc., Research Division

That's helpful. And then looking out into next year, there seems to be a little controversy in terms of the NAND market and what the expectations for NAND bits -- bit growth in the industry will be, some people calling for as high as 70%, others calling for more like 50%. I was wondering if you could maybe weigh in on where you see that bit growth coming in for next year and what factors are going to drive that either higher or lower.

D. Mark Durcan

Sure. Our internal modeling is in the sort of 65% to 70% range. But there's -- obviously, there’s some guardrails around that. We don't have complete accuracy or precision relative to our information. What can drive that up and down, obviously, is mix of 3-level cell versus 2-level cell versus single-level cell. So product mix going to the market can have a significant impact on bit growth without necessarily having a significant impact on profitability or cost per wafer. We have seen some level of new capacity come -- certainly planning to come into the market, and we've seen that be what I would characterize as relatively measured and, in some cases, muted relative to initial plans. And so I think what we anticipate is something in the 65% to 70% range. And if the market's stronger, maybe it'll be a little bit higher. And if the market's weaker, maybe it'll be a little bit lower.

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To: FUBHO who wrote (52504)3/25/2012 5:31:05 PM
From: Art Bechhoefer
1 Recommendation   of 60323
The restructuring of the Micron - Intel relationship seems designed to maintain the benefits of the Intel -SanDsk cross licensing agreement, meaning that Micron can continue to produce MLC and possible TLC chips without having to pay royalties to SanDisk. Any comments? Is it possible that SanDisk patents on TLC are not covered by the original Intel - SanDisk cross licensing agreement?

Looks like they (MU) found a way to buy out Intel's NAND operations without actually changing ownership.


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From: Sam3/25/2012 8:00:37 PM
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Perhaps this report from Digitimes on Thursday was partly responsible for Sandisk weakness on Friday. The real question which we won't know the answer to until their Q2 report (if then) is whether their cost has fallen more quickly than their ASP, due to using x3 at 19nm.

SanDisk taking lead in product price cuts
Josephine Lien, Taipei; Jessie Shen, DIGITIMES [Thursday 22 March 2012]
Prices for SD cards and other mainstream flash memory devices have been falling since late February, due to competition among suppliers, according to industry sources. SanDisk took the lead and other device manufacturers followed suit in dropping prices, the sources indicated.

The price competition is more fierce in emerging markets including India, Central and South America and Russia, the sources said. Despite having lowered its product prices, SanDisk is facing challenges from rivals which have been making price cuts significantly in order to defend their market shares, the sources noted.

Prices for 2GB and 4GB SD cards as well as microSD cards for digital cameras and smartphones saw substantial reductions recently, the sources observed. Meanwhile, prices for 16GB SD cards have slid to as low as about US$8, the sources said.

In contrast, prices for higher-end SD cards such as Class 10 models are relatively stable, the sources noted. Targeting enthusiast and professional photographers, the market segment is niche when compared with the market for Class 4 flash cards for mass-market applications, the sources said.

Suppliers' move to slash prices for entry-level and mainstream models is also intended to clear out inventories, the sources suggested.

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To: FUBHO who wrote (52504)3/25/2012 8:38:03 PM
From: Sam
   of 60323
It sounds like Micron was a little too optimistic in Q1 on SSDs. Here is Steve Appleton in the Q1 CC (back in December):

On the NAND front, the NAND Solutions Group on the NSG front, we've had a pretty strong quarter. The market highlight continues to be our progress in the solid-state drive space. Interesting enough, about 1/4 of our NAND bits are now going into this application. Obviously, there'll be an impact a little bit with your [indiscernible] coming out at IMFS. But that's really a good story for us. In fact, our quarter-over-quarter growth for SSD was almost 60%. So that's -- as we had referenced last time continuing to grow in a very good state. In fact, in the client category, we have design wins really at all of the large PC OEMs. In the enterprise space were well aligned with several of the top storage OEM guys. And we're expecting a pretty robust ramp during the 2012 market, as we move into next year.

But in this CC, they reported only about 15% growth. There were a couple of questions on it.

Daniel L. Amir - Lazard Capital Markets LLC, Research Division

Okay, and a follow-up on the SSD side. I mean, up 15% this quarter. I mean, should we expect similar growth rates in the next few quarters? I mean, how should we be looking at the SSD mix?

Mark W. Adams

Yes, I think I probably ought to speak to dynamic here, that if you go back into our last quarter, we saw a fair amount of OEM pull and channel pull ahead of -- in the last quarter due to the lack of hard drive availability. And what we saw after that was that the sell-through of that pull-through wasn't as much as the OEMs and the channel anticipated. So I would characterize it as a slightly decelerating growth as they -- as we work through the inventory. I think this is a short-term phenomenon, and I think you'll see our SSDs continue to grow. And I think maybe another quarter of right around this level is reasonable. But I think it's just a work-through out of the, I guess, the overexcitement around the preholiday SSDs given the hard drive issue.

Glen Yeung - Citigroup Inc, Research Division

Could you give us an update just on where we stand in terms of memory inventories that are out there? And should we expect anything unusual as we approach the launch of Windows 8?

Mark W. Adams

You know what? Except for what we identified in SSDs, I think overall, things are in pretty good balance. On the DRAM front, based on some of the dynamics going on with competition, it seems that DRAM is in a pretty healthy place, pretty moderate inventory. Our OEMs have come back with pretty strong upside demand signals for us in the -- in Q3. The dynamic in the spot market's a little bit different because we expect some of the smaller players liquidating for cash flow purposes. But in general, the market inventory situation is pretty good on DRAM. And in NAND, as I described in an earlier comment, I think the inventory situations needed just to work through this quarter on selling through SSD inventory that we have carried forward, and I think that is a short-term phenomenon. And I think overall, when we look at tablet growth and smartphones and SSDs combined, I think we're bullish out in the midterm and the longer term.

Mark C. Newman - Sanford C. Bernstein & Co., LLC., Research Division

A quick question first on the NAND pricing and demand side. How do you see that strengthening? Now obviously, we're still seeing some weakness right now. Just wondering when you'll see NAND pricing strengthen and then maybe looking forward, if you can make some comments on the supply side and how that's balancing with the demand in the second half of this year and into next year.

Mark W. Adams

The best way to characterize our position on that is we think that this a kind of an adjustment in terms of what's happened out of the SSD build from the Thailand situation, which we've commented on in the call today. We think it's a short-term phenomenon. We're pretty optimistic in the back half the year that the demand and supply balance in NAND will continue.

They also noted that about 30% of their NAND goes into SSDs:

D. Mark Durcan

Well, I think what we're trying to say is about 30% of the trade NAND is SSDs in one way, shape or form. So either internal SSDs or NAND that we sell into somebody else's SSD products.

Actually, I would have thought it was higher than that for them. But the takeaway point, I think, is that the Thai floods didn't lead to as many sales of SSDs as many people thought back in Q4 of '11. Which is pretty much what Sandisk predicted in their Q3 CC, if I recall it correctly.

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From: shlomi cohen3/26/2012 8:34:51 AM
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Margins Could See a Near Term Tailwind

despite worries about SSD. Reit Buy.

Japan Yen Trends Volatile, but Consistently So

We believe that foreign exchange rates continue to be a meaningful factor

influencing SanDisk’s wafer costs given that the majority of the company’s

costs are finished wafer procured from the Japanese joint ventures operated with

Toshiba. Over the past several years, we believe the Japan Yen (JPY) has seen

significant appreciation against the US Dollar (USD) due to Japan’s low interest

rate environment resulting in the Yen being a popular currency for the “carry

trade” amongst other purposes. With the CBOE’s VIX volatility index as a

rough proxy for market risk, we believe the recent 8% depreciation in the JPY

coincides well with the VIX trending meaningfully below the 20 level. Other

periods of significant market volatility such as 3Q08-2Q09, 2Q10-3Q10, and

2H11 have also seen more pronounced rallies in the JPY vs the USD.

Whilst the JPY is not the only factor that affects SanDisk’s wafer costs, we

believe the 8% decline since the beginning of February does offer positive

implications for 2Q12 gross margins (wafers purchased today have approx one

quarter delay to be sold through as revenue). We believe the recent JPY

performance could be a positive tailwind for SanDisk’s gross margins in the

near term. We estimate that a 5% depreciation in the JPY has a 200-300bps

positive impact on margins.

Micron May ’12 (F3Q) NAND ASP Commentary

Not Directly Applicable to SanDisk

We believe Micron’s recent F2Q12 results and outlook may have created some

confusion over the near term trends in NAND flash pricing. Whilst Micron’s

Feb ’12 quarter (F2Q) trade sales prices saw a -23% q/q decline, the company’s

comment that May ’12 (F3Q) prices are down mid-20’s vs the end of February

is painting an overly bleak picture of NAND market fundamentals. There are

two factors included in F3Q price commentary that had little weight in F2Q: 1)

Micron is ramping its mix of 3bit/cell TLC, which has a lower cost per bit and

the mix shift drags down the overall blended trade price, 2) due to its acquisition

of a sizable portion of Intel’s stake in the NAND JVs, sales of any product

sourced from the Manassas or IMFSingapore fabs will be considered trade sales,

but at pricing approximating cost + some margin, not market prices. Sales of

wafers from the Lehi fab to Intel will continue to be at cost and counted

separately from Micron’s trade sales.

NAND Price Trends – 1H12 Demand Still Tepid

Our checks also suggest that demand remains consistent with prior expectations,

with retail/consumer seasonality as the primary driver of slower demand

currently and there are fewer new mobile embedded product introductions this

year compared to a year ago. Besides Apple with its new iPad, there have not

been many major Android smartphone or tablet launches with the scale to help

stabilize near term demand and prices. Hence, we would expect NAND prices to

begin showing seasonal Q2 stabilization in coming month ahead of US

consumer demand.

Based on DRAMeXchange data, spot prices are down a modest -3% q/q whilst

contract is down -10% q/q. This compares to our SanDisk 1Q12 ASP decline

assumption of -13%. We note that for mainstream components such as 32Gb

and 64Gb, the spot price level remains at or above contract levels. Whilst this is

typically indicative of a strong demand or undersupply environment, we note

that the lack of significant industry capacity growth coupled with the new iPad

builds have likely kept supply/demand balance from becoming too disconnected.

Further, the NAND spot market is relatively thinly traded compared to the

DRAM market and hence possibly low/modest levels of spot product is leading

to the seemingly more positive NAND spot prices.

Based on our NAND retail price tracker, we estimate SD and USB flash drives

have seen the biggest sequential price declines of approx mid-20’s %. microSD

cards used in mobile devices have been surprisingly resilient and have been flat

for much of the quarter and SSD has seen a decline of approx -10%.

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To: shlomi cohen who wrote (52508)3/26/2012 11:24:50 AM
From: Art Bechhoefer
   of 60323
Re: UBS views on NAND prices and demand. The new Apple iPad is the single largest consumer of NAND, with over 3 million units sold the first weekend. It's hard to believe that UBS knows what they're talking about when they say that NAND demand is tepid. Really!


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To: Art Bechhoefer who wrote (52509)3/26/2012 11:45:13 AM
   of 60323
RE: The new Apple iPad is the single largest consumer of NAND

It is the largest consumer of NAND among tablets only.

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