| To: Debt Free who wrote (2035) | 4/23/2019 10:37:30 PM | | From: Elroy | | | | 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).
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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: Elroy | 4/24/2019 1:29:55 AM | | | | | | Micron Introduces New Series of High-Performance NVMe SSDs for Cloud and Enterprise Markets
finance.yahoo.com
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.
investors.micron.com
So since today's press release doesn't mention an internal MU controller, maybe it doesn't have one! |
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| From: Elroy | 4/25/2019 8:38:35 PM | | | | | | 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:
s21.q4cdn.com
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: Elroy | 4/26/2019 1:47:48 AM | | | | | | 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.
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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: Elroy | 4/26/2019 9:10:28 PM | | | | | | 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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| From: Elroy | 4/29/2019 10:16:58 PM | | | | | | Tidbits from WDC's conference call
Demand for flash-based products was slightly better than expectations; however, prices declined more than we anticipated.
We continue to make excellent progress toward commercializing our internally developed NVMe based platforms. I'm pleased to report the commencement of initial revenue shipments of our enterprise NVMe SSD and we are on track to accelerate the volume ramp of this product over the remainder of calendar 2019. We also commence shipments of our NVMe client SSDs based on 96-layer, 3D flash, BiCS4 technology. The manufacturing ramp and commercialization of BiCS4, which we believe is the industry's lowest cost technology is progressing well. In the second half of calendar 2019, BiCS4 will become our highest volume runner in terms of flash output.
In enterprise SSDs, NVMe product qualifications at hyperscale customers are progressing to plan. This product built on our internally developed controller and firmware, complements our other enterprise SSD solutions that are already shipping. Consistent with the platform approach we discussed last quarter, we expect to expand our enterprise SSD product portfolio throughout 2019 in a cost effective and predictable manner, including a version that incorporates BiCS4. In Client Devices, demand for hard drives for the PC market was slightly better than our expectations.
In client SSDs, our exabyte shipments more than doubled from a year ago quarter driven by strong price elasticity. Additionally, we've begun shipping our mainstream client SSD products based on BiCS4 technology. In client solutions, we are very pleased with the success of our external SSDs sold through retail and we have continued to expand our presence in this category over the last several quarters.
Based on recent industry announcements, we estimate flash industry supply growth to be slightly more than 30% in calendar 2019, somewhat lower from our prior forecast.
In Flash, our product portfolio in 2019 has been significantly enhanced with the expansion of our NVMe product line for both client and enterprise SSDs and we continue to have brand leadership in retail.
Flash revenue was $1.6 billion with a sequential bit decline of 5% and a sequential average selling price per gigabyte decline of 23%. The sequential decline in Flash revenue was primarily due to price, seasonality, and weaker sales of embedded mobile products.
Non-GAAP gross margin in the quarter was 25.3%, below our guidance of approximately 28% due to a $110 million charge or 300 basis point impact incurred for lower of cost or market LCM reserves. Flash non-GAAP gross margin was 21% due to the rate of price productions and the aforementioned $110 million LCM charge, primarily related to an inventory write down of multi-chip packages that contain DRAM.
Looking into the June quarter, we expect of flash and HDD inventory to decline on a sequential basis.
we'll continue to see a downdraft in terms of flash gross margins in the current quarter as we see cost -- price pressures continue.
we expect our top line to improve at a meaningful rate as we see demand pick up, capacity enterprise as well as seasonal pickup in demand from both a flash and from a hard drive perspective.
Let me provide a little bit more color on that, in the sense that we continue to expect that our hard drive margins will improve as we move through the balance of the calendar year. Flash becomes the wildcard, now I said this last call and I'm going to say it again because it really is the same answer. What are we assuming? We're assuming that we're going to continue to see pressure in terms of our flash gross margins as we move through the balance of the calendar year. And the reason that we're doing that principally is that, we want to plan for the worst and if you want to call it hope for the best. Now, we don't know exactly what's going to happen to Flash gross margins because a lot of that is dependent upon other factors that are outside of our control. What do our competitors do, production levels, demand levels, and all that. So, we don't know exactly how it's going to play out, but from our standpoint it is safest to assume that we're going to continue to see our Flash gross margins remain under some degree of pressure as we move through the calendar year, albeit maybe at a moderating level from a pricing perspective as we move through to the back half of the year. |
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| From: Elroy | 4/29/2019 10:23:35 PM | | | | | | TAIPEI, Taiwan and MILPITAS, Calif., April 29, 2019 (GLOBE NEWSWIRE) -- Silicon Motion Technology Corporation ( SIMO)(“Silicon Motion” or the “Company”), a global leader in designing and marketing NAND flash controllers for solid state storage devices, confirms today its quarterly cash dividend.
<p class="canvas-atom canvas-text Mb(1.0em) Mb(0)--sm Mt(0.8em)--sm" type="text" content="On October 29, 2018, the Board of Directors of the Company declared payment of an annual dividend of US$1.20 per ADS1, equivalent to US$0.30 per ordinary share, which will be paid in four quarterly installments of $0.30 per ADS, equivalent to US$0.075 per ordinary share. According to the previously announced record and payment dates, the next quarterly installment will be paid on May 23, 2019 to all shareholders of record on May 9, 2019. Our depository bank’s DR Books will be closed for issuance and cancellation on May 9, 2019.">On October 29, 2018, the Board of Directors of the Company declared payment of an annual dividend of US$1.20 per ADS1, equivalent to US$0.30 per ordinary share, which will be paid in four quarterly installments of $0.30 per ADS, equivalent to US$0.075 per ordinary share. According to the previously announced record and payment dates, the next quarterly installment will be paid on May 23, 2019 to all shareholders of record on May 9, 2019. Our depository bank’s DR Books will be closed for issuance and cancellation on May 9, 2019. |
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| From: Elroy | 5/3/2019 12:14:32 AM | | | | | | Wow. SIMO reported Q1. Revenues were $95m and they are guiding Q2 to $103m.
But this sentence is in the press release:
For full-year 2019, management believes it is likely that GAAP and Non-GAAP Revenue could be approximately similar to 2018
That means the average of Q3 and Q4 would be $180m? Hard to believe, but I like the news! |
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| From: Elroy | 5/4/2019 3:02:22 AM | | | | | | So....I've listened to the SIMO conference call and read the transcript. Interesting times for SIMO, that's for sure.
Lets see. The Good.....
The sale of FCI seems a good thing. It removes about $18m in annual operating expenses, and should increase gross and operating margins, all else being equal.
SIMO didn't buy any stock in Q1, so they have about $9.50 per share cash plus $1.30 per share coming in from the sale of FCI. Lots of cash.
SSD controllers are expected to grow 25% in Q2, and also grow strongly in H2 2019. This is 55% of sales, and is the growth area. Also, higher margins than other SIMO products. SIMO believes it will gain meaningful market share in SSD controllers in 2019, so the internal threat from WDC and now MU is not bothering them all that much. Seems good.
eMMC/UFS controllers shrunk so much in Q1, perhaps much of the decline of this segment has occurred, in Q1 2019, and it's done shrinking. Manamgement indicated the SK Hynix business would remain flat going forward (from low Q1 levels), UFS would grow (from a small base) and Chinese module makers would grow their eMMC + SIMO controller business strongly. So, maybe this segment has bottomed, and going forward it will move up from the low Q1 2019 level? I guess it's good to get the expected decline all out of the way ASAP. Yeah, 45% sequential decline is pretty awful, so hopefully this is flattish or better going forward.
Open Channel systems with the 2 Chinese hyperscale customers seems to be on track. Revenues commence in Q3 2019 hopefully.
Enterprise controllers will have initial sales in H2 2019 (from zero base) and then grow from 2020 on if the program is successul. Lets see, it may take a while, but this is a big greenfield space for SIMO. In 2020 and 2021 this could be a significant business if they do well.
The Bad....
Chinese procurement of enterprise SSD systems (Shannon, Ferri) are weak due to macro internet weakness in China. Fair enough.
The Unbelievable.
SIMO guided full year revenues to be about flat with 2018. So (excluding FCI) that means Q1 = $89m, Q2 is guided to about $103m, and full year 2018 (excluding FCI) was $500m. So H2 2019 revenues for SIMO need to be ~$300m, or $150m per Q. Seriously? Revenues are going to jump ~50% from Q2 to Q3?
SIMO also says H2 visibility is weaker than normal, and their forecast could be completely wrong.
Model
The good thing is due to the removal of FCI the model looks much better from EPS on a lower revenue level. For Q2 we have
Revenues = $104m.EPS = 59 cents.
And if they actually deliver $150m in Q3 (or Q4) on the same expense level ($27.5m without FCI, we get)
Revenues = $150m, EPS = $1.14
Hmmm, so it doesn't seem like it takes that much to get SIMO's EPS run rate back up to about $3.20 per year. If revenues are $122m per Q, they do about 80 cents EPS.
Well, I don't know what to say about them other than they seem to think a massive SIMO revenue pump is on the horizon, so might as well wait and see what they can do. |
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