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Technology Stocks : Silicon Motion Inc. (SIMO)
SIMO 92.00+1.7%Jan 14 4:00 PM EST

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From: Elroy3/20/2019 10:59:55 PM
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Lets see what MU's conference call says about SIMO's business.

In SSDs, we are making progress on transitioning to NVMe while continuing to improve our cost profile in SATA. In fiscal Q2, we began revenue shipments to a large PC OEM for our first NVMe client SSD, which features our internally designed controller, and are in active qualifications with other customers. We intend to introduce cloud and enterprise NVMe SSDs later this calendar year. In SATA, we introduced consumer and client SSDs based on 96-layer 3D NAND in fiscal Q2. In the cloud market, our custom persistent memory solution, which combines DRAM and NAND, is now fully ramped and contributed meaningfully to our cloud revenues.
That launch of internal MU NVME controllers is bad....

Now turning to end markets. I’ll start with mobile. During fiscal Q2 we grew revenues and expanded gross margins year-over-year despite adverse memory and storage pricing and weakness in high-end smartphone unit sales. Our performance in mobile was propelled by growth in our managed NAND portfolio, where NAND bit shipments grew more than 5x year-over-year.
I wonder if this means UFS with SIMO's controllers? What is their "managed NAND" portfolio??

NAND markets remain oversupplied from the acceleration in bit growth driven by the industry transition to 64-layer 3D NAND. Although fiscal Q2 pricing came in below our expectations, we are optimistic that demand elasticity and seasonal trends will support improving demand growth in the second half of the calendar year.

We have been managing our NAND bit supply growth prudently, including adjusting our capital planning and wafer volumes. We are reducing our total NAND wafer starts by approximately 5%, mostly through reductions on our legacy nodes.

Given these changes in DRAM and NAND industry conditions, we have reduced our CapEx for fiscal 2019 and are evaluating our CapEx for fiscal 2020. We are taking prudent actions to address the current market conditions, while executing well on our long-term strategic objectives.

NAND revenue declined 2% year-over-year and 18% from the prior quarter. NAND revenue represented 30% of total Company revenue in the fiscal Q2. Our overall NAND ASP declined in the mid-20% range, while shipment quantities increased in the upper single-digit percent range compared to the prior quarter. NAND bit shipments came in stronger than our expectation due to timing of demand from a large customer.

Inventory ended the quarter at $4.4 billion, increasing from $3.9 billion at the end of the fiscal first quarter. Our fiscal second quarter days of inventory were 134 days compared to 107 days in the fiscal first quarter. The actions that we have announced today regarding supply reductions, combined with improving customer demand, will begin to address our higher inventory levels.

Now, turning to our market outlook. DRAM and NAND markets are working through supply and demand imbalances. Our visibility remains low and the near-term environment remains challenging. While there have been CapEx reductions across the industry, they haven’t yet impacted output growth due to lead times.

Q; So, do you anticipate inventories actually moving higher here in the May quarter, before it starts to down shift in the back half of the calendar year?

A: Yes. I think, inventory might be a little bit elevated in the May quarter relative to where we are today. I think, we’ll be in pretty good shape on DRAM, as I said, as we kind of exit the calendar year. NAND will take a little bit longer because of the reasons we cited about keeping elevated levels of inventory into 2020.

as well as growing our mobile opportunities on the NAND side where we have gained meaningful share over the course of last few quarters.

and that was related to NAND. And with respect to the second part of your question, as I said before, that we do see evidence of inventory consumption by our customers and that gives us confidence that this inventory will largely work itself through the system in the first half with improvements in demand in the second half.
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