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   Technology StocksSilicon Motion Inc. (SIMO)

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From: Elroy3/26/2019 5:47:28 AM
   of 2621
Samsung Warns on Q1 Profit As Weak Memory, Smartphone Demand Weighs on Chipmaker

Samsung Electronics warned that its first quarter profits, already hit by slowing semiconductor sales and limp smartphone demand, would likely miss estimates as the world's biggest chipmaker provided a rare pre-earnings update to market regulators Tuesday.

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From: Elroy4/9/2019 8:45:06 AM
2 Recommendations   of 2621
Silicon Motion Announces Preliminary First Quarter 2019 Revenue and Earnings Conference Call Details

TAIPEI, Taiwan and MILPITAS, Calif., April 09, 2019 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation (NasdaqGS: SIMO)(“Silicon Motion” or the “Company”), a global leader in NAND flash controllers for solid state storage devices, announces that based on its preliminary first quarter financial results, revenue is expected to be within 5% below the low-end of the original guidance range of $97.5 million to $103.6 million that the company issued on January 30, 2019. Gross margin (non-GAAP) is expected to be within 50 basis points above the high-end of the company's original guidance range of 47.0% to 50.0%.


Stinks! But we knew this quarter stunk. Future is the key.

Strange to have weak sales and above average gross margins. Perhaps controller sales were strong, but eMMC was weak as they were supposed to be dumping old low gross margin eMMC in the Q.

With those results, I think we get

$94m sales
$47.5m gross margins
$33.5m operating expense
$14m operating profit
$12m net profit

34m shares out,

So.......~34 cents EPS? Not too good......

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From: Elroy4/18/2019 12:48:35 AM
   of 2621
The China Flash Market web page tracks memory prices. After being stable for a good while, the prices of SSDs are (finally) collapsing.

A 256GB TLC SSD has gone from $35 in the beginning of the year to $28 today. That type of price decline should drive adoption across the board....

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From: Elroy4/19/2019 11:54:21 PM
   of 2621

NAND flash price falls to slow
Siu Han, Taipei; Jessie Shen, DIGITIMES
Friday 19 April 2019

NAND flash prices are expected to fall less than 10% sequentially in the second quarter of 2019, and will likely stop falling later this year, according to industry sources.

Having fallen since 2018, NAND flash prices dropped further in the first quarter of 2019, said the sources. Samsung Electronics started cutting its NAND flash quotes in the first quarter aiming to clear out inventory, sending other NAND flash chipmakers following suit, the sources indicated.

Samsung is likely to continue its low-price strategy, but at a moderate pace, in the second quarter, the sources noted. Meanwhile, other NAND flash chipmakers intend to not follow suit this time given that prices are approaching their cash costs, the sources said.

NAND flash chipmakers have seen their inventory levels pile up since the second half of 2018, due mainly to a slowdown in demand for datacenter applications. Inventory build-ups already prompted Samsung to take the lead in cutting prices, the sources suggested.

Meanwhile, falling NAND flash prices are driving greater SSD adoption in PCs and other client devices, while the memory content per box for smartphones and other end devices continues to increase. End-market demand is expected to rise starting from the third quarter, bringing stability to NAND flash prices, the sources said.

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To: Elroy who wrote (2034)4/23/2019 1:14:58 PM
From: Debt Free
   of 2621
what do you think of SIMO going forward, are you still bullish on them?

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To: Debt Free who wrote (2035)4/23/2019 10:37:30 PM
From: Elroy
1 Recommendation   of 2621
No, I'm not nearly as optimistic on SIMO today as I have been in the past. There are lots and lots of moving parts, some very positive, others very negative, and I don't know which will win over the other.

The good

Shannon product sales to the 2 major Chinese cloud service providers should commence in Q2 this year, and then may ramp strongly, hopefully for years and years.

Client SSDs are supposed ramp strongly as NAND prices are super low

MRVL has exited the client SSD controller space, leaving it to SIMO. At the beginning of 2019 SIMO says they have 70% more client SSD design wins that at the beginning of 2018.

SIMO is buying back shares. Maybe they really believe the current slowdown is temporary, and their sales will rebound strongly. If so, buying shares now is good idea. But still.....

The bad

eMMC is getting displaced by UFS as the cell phone memory connectivity technology. SIMO's market share in UFS is likely to be lower than it was in eMMC, so this segment should decline going forward. It's about 30% of sales.

Both WDC and now MU have created internal client SSD controllers. Those two NAND makers also buy SSD controllers from SIMO. If their internal client SSDs with their internal controllers do well, that's market share loss for SIMO.

Q1 2019 sales are downright awful. SIMO says full year 2019 sales should be equal to full year 2018, but that requires a MASSIVE revenue increase from Q1 2019 to the rest of the year. Often, massive revenue increases do not occur.

The confusing (things not working out the way they are supposed to.....)

NAND prices have fallen sharply over the past year. Everyone in the industry knew and expected this. As NAND prices fall, we would expect client SSD adoption in PCs to accelerate significantly, and general NAND usage in device to accelerate significantly. So here we are one year into the NAND price decline, and SIMO is reporting 2-3 year low revenue levels. Should be the opposite, and It's unclear why the decline in NAND price is not driving significant increases in NAND controller sales (which always happened in previous NAND downturns).


So, currently SIMO has lots of headwinds, and uncertain tailwinds, so it seems more of a mystery than a solid BUY selection. In order for the share price to do well, I think it needs a massive jump in revenues. What tech stock won't do well with a massive jump in revenues? In other words, the thing that makes SIMO stock work now (huge jump in sales) is not something that gives you confidence as an investment pick. ANY tech stock will do well with a massive jump in revenues.

If I didn't own it now, I wouldn't buy it now, that's for sure.

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From: Elroy4/24/2019 1:29:55 AM
   of 2621
Micron Introduces New Series of High-Performance NVMe SSDs for Cloud and Enterprise Markets

I don't see any mention of whether these new high end SSDs use a MU controller or merchant controller.......that's good.

In this previous SSD announcement on Mar 19th MU wrote - BOISE, Idaho, March 18, 2019 (GLOBE NEWSWIRE) -- Micron Technology, Inc. (Nasdaq: MU), today announced a new solid-state drive (SSD) portfolio featuring support for the NVM Express™ (NVMe™) protocol, bringing increased bandwidth and reduced latency to client computing markets. The Micron® 2200 PCIe™ NVMe SSD is a vertically integrated solution — including 3D TLC NAND, internally designed ASIC drive controller and firmware in an M.2 form factor.

So since today's press release doesn't mention an internal MU controller, maybe it doesn't have one!

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From: Elroy4/25/2019 8:38:35 PM
1 Recommendation   of 2621
INTC reported Q1 results. The press release only says the memory segment was down 12% year on year. That sounds pretty good considering what's going on in NAND! Not sure what all is in INTC's memory business, but the conference call will perhaps explain it better.

The press release does single out a challenging NAND environment.

Hard to understand why NAND prices appear to be really really collapsing, but cheap NAND is not yet resulting in massive unit increases in SIMO NAND controllers. This is the biggest SIMO mystery for me at this time. If NAND today costs 40% to 50% of what it cost a year ago, then lots of new devices which use disk drives or other storage media a year ago should be using NAND today. And yet, instead all that seems to be happening is nobody is buying anything.......

Here's INTC's Q1 presentation:

Q1 Non-GAAP Operating Margin 28%, 2 points lower .... lower spending and ASP strength (??) offset by impact of 10 nm ramp and NAND reserves (!!)

What's a NAND reserve?? Whatever it is, doesn't sound good......

It's only one data point, but impressive that INTC actually delivered non-GAAP EPS up 2 cents over the year ago quarter. The more pure play memory makers are going to do much much much worse than that. I guess that's a benefit of diversification....

There is something called NSG (meaning??) in their presentation, which I think is the NAND group. NSG sales are only down ~11% year on year. I think that's excellent compared to WDC and MU. INTC says price pressure is a problem, but bit production increases are good, so the result is sales down 11%. Seems excellent in comparison to the regular NAND makers. I wonder why INTC's NAND is doing way way way better than the other NAND makers' NAND segments?

Market weakness results in inventory revaluation (I guess that's the "reserve"), and they are reducing NAND output. So......some of their NAND inventory on their balance sheet is worth less than cost, I suppose. Not sure why else they would need to write it down. I think it means going forward NAND gross margin is expected to continue to decline.....

I'm sure there is more in the conference call, but NAND is listed under all the presentation areas that are "problems".

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From: Elroy4/26/2019 1:47:48 AM
   of 2621
Some tidbits from INTC's conference call that may affect SIMO......

coming off a record 2018, our top line results came in slightly higher than expectations, with upsides in the PC and IoT segments, offset by incremental NAND pricing weakness.

The decline in memory pricing has intensified.

We are also anticipating an incrementally more challenging NAND pricing environment.

Our memory business was down 12% due to continued NAND pricing pressures, offset by NAND data center and client bit growth. Operating income for this group is down driven by NAND ASP deterioration and demand softness, resulting in inventory revaluations.

We expect Q2 revenue to be $15.6 billion, down 8% year-over-year. Our data-centric businesses are expected to decline in the high single digits year-over-year as memory pricing declines weigh on our NAND business and DCG customers continue to consume inventory and absorb capacity.

But Q1 is just the dynamics of all of that ramp cost going through cost of sales. That was planned and that was anticipated. The not planned in the quarter was just the (NAND) ASP declined much greater than we had anticipated for NSG. We were in the -- we were expecting kind of mid-20s to 30% ASP declines. The reality is it was closer to the mid-40s. And as a result, and George flagged this, but as a result, we had to take a lower cost or market reserve against our inventory balance in the quarter. That cost us over 1 point of gross margins in the quarter. That we did not quite anticipate.


The running theme throughout the call about NAND (a small chunk of INTC's total sales) is that NAND price declines in Q1 were worse than expected, and NAND is a main "problem area".

I wonder what WDC is going to say, when NAND price is weak their NAND sales stink, and their disk drive sales go away forever as the disk drive is replaced by a cheap NAND drive.

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From: Elroy4/26/2019 9:10:28 PM
   of 2621
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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