It literally keeps getting better each day when it comes to memory market fundamentals...
Intel, Micron, Linear Lead Drexel’s Upbeat Economic Outlook
By Tiernan Ray
Drexel Hamilton‘s Richard Whittington today opines that with a rising global economy, “economically sensitive semiconductor names will continue coming to the fore,” among which he considers Intel (INTC), Linear Technology (LLTC), and Micron Technology (MU), all of which he rates at Buy, the chief beneficiaries.
Whittington cites a number of factors, including broad investment in infrastructure, low inventories in the chip world, and tight pricing for some components such as DRAM:
Chalking it up to monetary mumbo jumbo, nearly all have missed the fundamental facts on the ground: lean supply chains intersect rising confidence and historic low interest rates as the world demands technically advanced goods [...] Infrastructure-tied to developed economies the past decade, far more populated developing nations have been upping the take of increasingly electronics-denominated industrial and consumer goods while plugging into the Cloud [...] Derived demand for electronic components through increasingly opaque supply chains is now stressing the productive base as the foremost semiconductor commodity, main system memory, continues in acute undersupply [...] The precise opposite of what many have expected, first day of this new year spot trading has seen another surge in 2Gb PC DRAM prices, respective 5%-6% day-day gains, with minimally tested 4Gb densities rising nearly 2% [...] Articles citing stepped up component orders by Lenovo seeking to gain notebook, tablet and smartphone share as well as Taiwanese memory module suppliers citing ongoing tight market conditions, DRAM pricing remains upward biased [...] Tier one and smaller OEMs already locking up available supplies for the remainder of typically seasonally soft calendar Q1 at prices several percent above what they paid the prior period, spot channels have become thin and fragile [...] Still, the first order conclusion of what is to be publicly seen is that electronics OEMs are upping build rates above prior commitments, imparting new stress and strain on the installed productive base.
Whittington likes Intel, Micron and Linear as companies “solely relying on internally derived output” of chip manufacturing, and, hence “can avail of improving cyclical conditions.”
Intel shares are down 30 cents, or 1.2%, at $25.65, Micron shares are down 23 cents, or 1%, at $21.52, and Linear stock is down 73 cents, 1.6%, at $44.82.
