DRAM Sales Could Drag in 2008
J.P. Morgan Securities
ON SATURDAY, the Semiconductor Industry Association released global semiconductor data for the month of November and stated three-month-moving-average DRAM (dynamic random access memory) revenue declined 35.6% year-over-year to $2.2 billion, slightly below our estimate of down 34.1% year-over-year.
We would note the SIA restated its prior 2007 monthly DRAM data with a cumulative effect of lowering October year-to-date DRAM revenue by roughly $1.4 billion.
November monthly sales grew 0.3% month-over-month to $2.1 billion, in line with our estimate, but below-normal seasonality of up 6.3% month-over-month for November. Pricing decreased 7.3% month-over-month, roughly in line with our estimate. Units grew 8.2% month-over-month, above a normal seasonal increase of 4.1% month-over-month.
DRAM revenue as a percent of total global semiconductor revenue fell 10 basis points month-over-month to 9.6% in November, near the low-end of a historic range of roughly 8%-18% of global semiconductor revenue.
We are lowering our calendar 2007 DRAM revenue forecast from down 8% year-over-year to down 12% year-over-year due to the restatement. We are also lowering our calendar 2008 DRAM forecast from up 1% year-over-year to flat year-over-year.
It's time to do work on memory, but not time to be aggressive buyers of memory stocks. While Micron Technology and Qimonda AG are trading near historical trough valuations and we have seen some early signs of rational behavior (Qimonda lowering wafer starts, Micron and Qimonda guiding for lower capital spending in 2008), we remain concerned on limited upside to estimates and component pricing in the near term as we enter the seasonally slower first half of the year.
We would also note that while DRAM production growth in calendar 2008 appears to be slowing, it is still estimated to be higher than normal historical growth rates of roughly 50%-55% year-over-year.
Potential catalysts we are watching for include significant capital-spending cuts and lower production forecasts by leading memory vendors such as Samsung, the DDR3 product transition, and signs of strong PC component demand as we exit an expected seasonally slow first half of 2008.
