7:20 Semiconductor Components Distributor Shipments See Steep Declines in Nov - FBR
Friedman Billings notes recent checks with Asian chip distributors were worse than their prior expectations, reflecting continued global demand weakness. In terms of specific companies, they believe shipments from Texas Instruments (TXN), Microsemi (MSCC), and AMD (AMD) were down as much as 20%-30% MOM in November, likely impacted by these firms' 'sell-in' revenue recognition methodology. Their contacts said that DRAM pricing should continue to decline through this spring, and said that further production cuts need to come from Samsung and Micron (MU) in order for pricing to stabilize in 2H09. NAND flash pricing was also under considerable pressure, but was relatively better off than DRAM given higher exposure to faster growth markets such as netbooks, smartphones, and game consoles. Overall, inventories have actually increased by three to five days from October due to lower-than-expected sales and stricter accounts receivable controls. For 1Q09, their contacts expect a 15%-20% sequential decline in distributor shipments. They believe a fundamental bottom may form in 1H09, and that distributors may replenish component inventories sometime this summer, providing an industry catalyst in 2H09. Their preferred longs, in order of preference, include ONNN, MRVL, MSCC, SLAB,
