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Wednesday, May 21, 2008

Memory price update - 2H May

As I mentioned earlier this week, DRAM prices moved up. Flash prices appear to have moved down slightly -- 2-3%. This doesn't really matter. Spot prices were beneath flash prices. I wouldn't get overly excited about it.

Perhaps more revelatory, however, is what's happening at Kinsus, a packager in Taiwan. These comments out of Citi:

* What are our concerns- - 1) Kinsus's sales could decline
sequentially in 2Q08E, falling far short of Bloomberg
consensus expectations of 11% qoq growth; 2) Our industry
checks suggest large order cuts by customers in comms
(from 10-20% qoq growth to a slight decline QoQ), NAND
flash card substrates (orders being cut by 2/3, from 25%
of sales in 1Q08 to 8% of sales in 2Q), and set-top-box
ICs (a 50% cut by one large customer); 3) Production
bottlenecks could affect advanced FC CSP substrates (20%
sales in 2Q08E) and utilization in wirebonding substrates
could be much lower.

Customers are Broadcom, Qualcomm, Samsung, Toshiba and Sandisk. That's a pretty dramatic change in patterns, particularly at the end of what a number of companies are saying is a back-end loaded quarter.

As I've said, I don't like the SOX much 410-420. I think the risk/reward is poor. Inventory levels seem to be consistently higher across a broad spectrum of the supply chain than they ought to be heading into the slowness that is summer.

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