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#1 Tor

Tor

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Posted 18 January 2007 - 07:33 AM

In line with our expectations, DRAM prices have started to collapse. Today, the benchmark DDR2 512Mb 667 Mhz spot price has fallen 3.7%, 533Mhz by 3.1% and DDR2 UTT by 10% - by far the largest single day falls in the past year. With Vista related demand clearly disappointing, we believe traders are losing confidence. DRAM & equipment stocks can get badly hit. Sell. We've been sounding like a shrill stuck record for the past 3 to 4 months, repeating our view that DRAM is heading for a major collapse in pricing (>50%) due to the expectation and disappointment associated with the launch of Vista. This view has been diametrically opposite to that of DRAM companies like Samsung Electronics and Qimonda, as well as equipment companies like ASML which have been super bullish on the outlook for DRAM through most of this year. We believe DRAM is too expensive for configurations to rise above the current 1GB average and businesses will wait for 6 to 12 months to buy a new Vista PC. A short lived consumer pick up will not be able to compensate for this. But massively bullish DRAM companies have placed huge orders for equipment as they head to 65% supply growth next year. With demand likely to come well below, DRAM prices are likely to collapse as happened with Win 95 and Win 2000. Despite weak demand in the spot market so far, prices were not collapsing as traders were hoping for a Vista related pick up. We now believe that sentiment is rapidly changing to a view that such a pick up will not come even after the launch of the consumer version, given no pick up even a couple of weeks before the launch. The business launch has come and gone with no impact. As a result, traders are now selling out of the commodity, resulting in prices going into free fall. We believe that this trend will continue for the best part of this year leading to at least a 50% fall in DRAM pricing. There is no doubt that contract prices will chase spot prices in the weeks and months ahead as is normal. As a result, we believe that DRAM companies can start heading for losses as soon as the June quarter. DRAM companies are also likely to cancel/pushout equipment orders as well as refrain from placing new equipment orders. Almost all the order strength of equipment companies like ASML has come from DRAM and if this collapses, the outlook for these companies could weaken significantly. We recommend selling out of DRAM and equipment companies immediately
Observer

The future is 90% present and 10% vision.

#2 Bob-C

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Posted 18 January 2007 - 07:42 AM

In line with our expectations, DRAM prices have started to collapse. Today,
the benchmark DDR2 512Mb 667 Mhz spot price has fallen 3.7%, 533Mhz
by 3.1% and DDR2 UTT by 10% - by far the largest single day falls in the
past year. With Vista related demand clearly disappointing, we believe
traders are losing confidence. DRAM & equipment stocks can get badly hit.
Sell.
We've been sounding like a shrill stuck record for the past 3 to 4 months,
repeating our view that DRAM is heading for a major collapse in pricing (>50%)
due to the expectation and disappointment associated with the launch of Vista.
This view has been diametrically opposite to that of DRAM companies like
Samsung Electronics and Qimonda, as well as equipment companies like ASML
which have been super bullish on the outlook for DRAM through most of this
year.
We believe DRAM is too expensive for configurations to rise above the current
1GB average and businesses will wait for 6 to 12 months to buy a new Vista PC.
A short lived consumer pick up will not be able to compensate for this.
But massively bullish DRAM companies have placed huge orders for equipment
as they head to 65% supply growth next year. With demand likely to come well
below, DRAM prices are likely to collapse as happened with Win 95 and Win
2000.
Despite weak demand in the spot market so far, prices were not collapsing as
traders were hoping for a Vista related pick up. We now believe that sentiment is
rapidly changing to a view that such a pick up will not come even after the
launch of the consumer version, given no pick up even a couple of weeks before
the launch. The business launch has come and gone with no impact. As a result,
traders are now selling out of the commodity, resulting in prices going into free
fall. We believe that this trend will continue for the best part of this year leading
to at least a 50% fall in DRAM pricing.
There is no doubt that contract prices will chase spot prices in the weeks and
months ahead as is normal. As a result, we believe that DRAM companies can
start heading for losses as soon as the June quarter. DRAM companies are also
likely to cancel/pushout equipment orders as well as refrain from placing new
equipment orders. Almost all the order strength of equipment companies like
ASML has come from DRAM and if this collapses, the outlook for these
companies could weaken significantly. We recommend selling out of DRAM and
equipment companies immediately

Hi Tor, thanks for the important semiconductor pricing update. :) Are you short and/or looking to looking to short and/or buy puts on selected semis, SOX, and/or SMH? Where do you see SMH and SOX headed in the ST?

Good luck on your trades, :)

Bob-C
Disclaimer: None of my posts are meant to be taken as investment advice or trading advice. Do your own due diligence and consult your financial advisor before making any trades or investments.

#3 Tor

Tor

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Posted 18 January 2007 - 08:56 AM

not short, but looking to short. good luck whatever you decide to do.
Observer

The future is 90% present and 10% vision.

#4 Bob-C

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Posted 18 January 2007 - 09:02 AM

not short, but looking to short.

good luck whatever you decide to do.

Thanks Tor.

Best, :)

Bob
Disclaimer: None of my posts are meant to be taken as investment advice or trading advice. Do your own due diligence and consult your financial advisor before making any trades or investments.