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Technology Stocks : Silicon Motion Inc. (SIMO)
SIMO 38.90+2.6%Oct 21 4:00 PM EDT

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From: Elroy4/26/2019 9:10:28 PM
   of 2094
 
Some tidbits from SK Hynix's Q1 conference call....

NAND Flash bit shipment was reduced 6% quarter-on-quarter, performing better than expected. There was a slowdown in overall demand but the company actively responded to the market for a high-density mobile applications. ASP was down 32% quarter-on-quarter, showing a steeper decline as competition became more intense among suppliers, looking to adjust their inventory, and as the portion of sales increased for higher-density products which have lower price per unit.

MCP sales decreased 32% quarter-on-quarter as its bit shipment declined due to weak set demand even as Chinese smartphone makers continue to adopt higher memory density. Meanwhile, its sales portion out of total revenue was retained at last quarter's 23%.

Operating profit in the first quarter was KRW 1.366 trillion, down 69% from the previous quarter. Even as revenue was reduced, there was increase in expense for the initial operation of the M15 fab as well as recognition of inventory write-off due to sharp price erosion.

In the NAND market, there was also faster-than-expected price decline across all applications in the first quarter, following severe price competition among suppliers led by higher level of inventory burden across the industry. But now well over into 1 year of price decline, there is elastic increase in demand due to the lowered price. With increasing SSD adoption rate in PCs, the NAND content began to increase at the same time. The move to higher mobile NAND content is also accelerating.

Demand recovery is expected to gain momentum in the second quarter with the portion increase of 128-gigabyte NAND adoption among MCPs. Also, 256-gigabyte NAND products, which was regarded as higher-end specifications, will start to be adopted even in MCPs. Moreover, PC SSDs adopting 512 gigabytes and above will be gradually increased to reach around 30% at year-end.

Along with such demand trend, the pace of wafer input and ramp-up of next-gen products is expected to be adjusted following NAND players' announcement. Consequently, suppliers' inventory burden as well as the rate of price decline is predicted to gradually ease.

Meanwhile, DRAM and NAND bit shipment growth in the second quarter is planned at around mid-10% and mid-20%, respectively, with the base effect in the previous quarter, gradual recovery in customers' component purchases and demand elasticity from lowered price. For the full year, DRAM bit shipment growth is planned at mid- to high 10%, and NAND bit shipment growth at more than high 30%, the same as our original guidance.

Now for NAND, looking at the inventory at the end of the first quarter. Then yes, we see that the volume has -- appears to gone up on a quarter-on-quarter basis. But then when we look at the number of days in the inventory, then given the sales projection for the second quarter, then we can see that it has actually gone down.

And then now by the end of the second quarter, there is a possibility of the NAND inventory increasing slightly, but then the increase is not -- the increase itself is going to be limited. And then going into the third quarter and the fourth, the NAND inventory would also start to go down. And by the end of the year, it will stabilize at a normal level.

Now regarding your second question about the inventory write-off. Yes, it's true that in the first quarter, there has been sizable inventory write-off because of the concentrated cost for initial operation of the new fab and also the sharp decline in the prices. But then in the second quarter, because the buildup in the inventory is going to slow down and also the price decline is going to slow down. So we believe that in the second quarter, the inventory write-off increase is not going to be significant.
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