Wednesday, March 25, 2015 8:39:19 AM
Mar. 25, 2015 12:24 AM ET | 10 comments | About: Micron Technology Inc. (MU), Includes: AAPL
Disclosure: The author is long INTC, AAPL, MSFT. (More...)
Summary
Micron can benefit from the rise of $300 premium phones with 4GB RAM, like the Asus ZenFone 2.
Expensive phones like the iPhone 6 will eventually have to come with 4GB RAM.
Supplying the mobile DRAM requirements of Intel-powered Android and Windows 10 smartphones and tablets could be a strong tailwind for Micron.
This year has been brutal for Micron (NASDAQ:MU). The stock's YTD performance is down more than 21%. However, I remain bullish on Micron, because manufacturers are now releasing budget-friendly smartphones and tablets with more mobile DRAM. Thanks to the efforts of Intel (NASDAQ:INTC), Apple (NASDAQ:AAPL), Samsung (OTC:SSNLF), MediaTek, and Qualcomm (NASDAQ:QCOM), 64-bit mobile processors are now the norm for new high-end and low-cost smartphones and tablets.
The Intel-powered Asus ZenFone 2 is the first commercial Android phone to launch with 4GB mobile DRAM. The premium-quality and award-winning ZenFone 2 posted record-setting AnTuTu benchmark scores, but it sells for just $285 in Taiwan. Micron's mobile DRAM business will benefit a lot, because all major smartphone vendors will eventually have to deliver $300 smartphones with 4GB RAM.
(click to enlarge) (click link below for charts/tables)
(Source: ASUSTeK)
Apple Might Bump Up RAM of New iOS Devices
The gazillion-selling iPhone 6 and iPhone 6 Plus still used 1GB LPDDR3 RAM (from Elpida - a subsidiary of Micron). This is in spite of the 64-bit A8 processor they used. It will be very hard for Apple to justify the $650 price tag of the next iPhone if it again comes with just 1GB RAM. Smartphones are the new computers that people now use every day.
If new desktop computers had 4GB of default RAM five years ago, it is only evolutionary that smartphones should get the same amount of RAM today.
Asus is now leading the trend of 4GB RAM-equipped Android smartphones, which could hurt future sales of weakling 1GB-RAM iPhones. Here are just some of the premium handsets that have more RAM than the iPhone 6.
(click to enlarge) (click link below for charts/tables)
(Source: Oizoioi)
The reason why OEMs are now putting more RAM in their phones is that mobile gaming and multi-tab Safari web browsing delivers faster performance when there's more RAM available. The bigger display sizes of the iPhone 6/6 Plus means more people are using them to browse the internet. 4 or more tabs on Safari will already choke the 1GB RAM of the iPhone 6 Plus.
Even though Apple has been promoting its new Metal API gaming, the performance of mobile games (like PC games) does not only rely on processor and GPU power. Multiplayer online mobile games like Vainglory, Plunder Pirates, and Battle Supremacy need more than 1GB RAM to deliver lag-free performance when there are several players engaged in combat.
The advent of HD video recording and HDR photography in smartphones also gets a boost from more RAM. The iPhone 6 camera can record HD videos, but the 1GB RAM is insufficient for serious HD 1080p video editing. There are now video editing apps on iTunes, but people still prefer to edit their iPhone 6 videos on Macs or Wintel computers.
The Enterprise Users Also Want More RAM Inside Their Tablets
The enterprise deal with IBM Corp. (NYSE:IBM) last year might have been one of the reasons why Apple put 2GB RAM inside the iPad Air 2. Corporate users will not be happy when their web browsing experience is hampered by low memory warning. Enterprise devices are also usually loaded with custom mobile apps, which need lots of RAM for optimal runtime.
IBM helped modify a Samsung Galaxy S Tab 10.5 (not an iPad) to create the $2,380 SecuTablet for the Enterprise market. The Galaxy S Tab 10.5 has 3GB of LPDDR3 RAM. If Apple seriously wants to see the iPad qualify for IBM's exacting requirements for Enterprise usage, it will need to put 3GB or more RAM in the future iPad Air 3 or iPad Pro.
Rumor has it that the iPhone 6S will come with 2GB RAM. This is still below the 3GB RAM inside the Samsung Galaxy S6 and the Xiaomi Mi4. The next iPhone release should also come with 3GB or 4GB RAM. Apple makes so much money on every iPhone that the $20-25 cost of 4GB LPDDR3 RAM is a cheap way to win the respect of enterprise customers.
Apple should remember that Microsoft's (NASDAQ:MSFT) enterprise-centric Surface 3 Pro came in 4GB/8GB RAM configurations. A 2GB RAM iPad Pro will still be a weaker multi-tasking gadget for serious enterprise or creative professionals.
Conclusion
Please look at the charts below, and you will understand why I believe that the rise of $300 smartphones with 4GB DRAM is a tailwind for MU. Micron is the third-biggest supplier of mobile DRAM. Samsung, by virtue of it being the world's biggest vendor of smartphones and tablets, is still No. 1
Micron can leverage its close ties with Intel to win the support of OEMs (like Asus) that make Intel-powered smartphones and tablets. Asus's act of releasing a $300 Android premium phone with 4GB RAM will pressure Xiaomi, Samsung, Lenovo, and other major phone vendors to also come up with 4GB-RAM Android phones.
Consequently, Apple will have no choice but to buy 2GB, 3GB, 4GB RAM modules instead of the 1GB from Elpida. Last month's report that Apple will source out its DDR4 mobile requirements from Samsung is a headwind for Micron. However, let us not forget that Micron-Elpida has been sampling LPDDR4 since January 2014.
Elpida could still supply some LPDDR4 RAMs to the next iPhone models. On the other hand, supplying 4GB LPDDR3 RAM to $300 Android and Windows 10 phones could already improve Micron's mobile RAM business. The smartphone and tablet industry is not exclusive to Apple devices. Android and Windows mobile devices are now in a race-to-the-bottom pricing war.
The next-generation smartphones and tablets will not only be cheaper, they will also have at least 2GB RAM. Micron is ready to compete with Samsung and SK Hynix (OTC:HXSCF). Micron is already sampling an 8GB LPDDR4 product since last year.
MU is a Buy. The 2015 beating pushed down MU to have less than 10x P/E and 2x P/S.
(Source: getaom.com) (click link below for charts/tables)
The market forecast engine at I KnowFirst affirms my bullish outlook for Micron. I KnowFirst says Micron has one of the strongest Buy signals for the 30-day and 90-day horizon. The positive +33.02 and +19.89 algorithmic scores say MU is currently undervalued.
(click to enlarge)
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http://seekingalpha.com/article/3025986-micron-the-era-of-300-smartphones-with-4gb-ram-is-a-tailwind?auth_param=udil:1ah4e4o:93d8a59295488f6262df015fae6c0f60&uprof=46
MU
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