Samsung's Q2 hit by weak DRAM market
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(InfoWorld) - Samsung Electronics saw a sharp fall in operating profits during the three months from April to June due to theÂ weak marketÂ for computer memory chips. Prices of the chips, which are used for the main memory in personal computers, fell because supply exceeded demand. That hit Samsung because it's one of the world's largest makers of DRAM (dynamic RAM) chips. The company said operating profit was 910 billion won ($985 million) as of the last day of the period being reported), which is down from 1.4 trillion won ($1.5 billion) in the second quarter of 2006. Net profit, which is a wider measure of profitability and includes subsidiaries and non-core operations, was down slightly at 1.42 trillion won from 1.5 trillion won a year earlier. Net sales were up 4 percent to 14.6 trillion won. "Despite the dire business environment, such as the precipitous fall of DRAM (dynamic RAM) prices and seasonality, we have posted a decent result in Q2," said Chu Woosik, head of investor relations at Samsung, in a conference call with analysts. Profits at Samsung's semiconductor unit dropped by two-thirds as a result of the weak DRAM market. The good news, said Chu, is that the DRAM market is already starting to show signs of a turn-around, thanks to interest in Windows Vista PCs, which require more memory. During the remainder of the year the market for DRAM chips is expected to be strong, he said. Strong demand for Apple's iPhone and competing handsets are alsoÂ expected to keep up pricesÂ and profits for NAND flash memory, which is Samsung's other major memory chip product, strong. Chu said Samsung is in talks with several consumer electronics companies about supplying chips for as-yet-unannounced portable media players with video. Samsung's cellphone handset business was one of the brightest spots in the results. The company shipped a record 37.4 million phones in the quarter thanks to the popularity of its thin "Ultra" edition handsets. The second quarter was the fourth consecutive quarter in which Samsung reported record sales. As a result Samsung said it now expects to ship more than 150 million phones this year, up from its previous target of 133 million. The LCD (liquid crystal display) business enjoyed brisk business and Samsung shipped a record 2 million displays in the 40-inch and above class. Sales rose by 17 percent and operating profits surged 290 percent. Looking ahead, Chu said Samsung expects the remainder of the year to be strong for the company. "We are very optimistic about the second half," he said. "We are expecting all of our major business units to experience very high levels of demand and recovery starting from Q3. As a result of such an improvement coupled with our vigorous attempts to reduce cost, we are hoping to see significant improvements in the bottom line in Q3. We expect this nice recovery to last throughout the rest of the year." Â
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Soft Vista sales and overenthusiastic factory construction are combining to deliver a nice present for those seeking DRAM bargains: Prices have tumbled to their lowest levels of 2007, and analysts say the fun may not be over yet.
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Samsung Electronics , the world's top memory chip maker, reported a smaller-than-expected 5 percent drop in quarterly profit on Friday after a steep fall in computer memory chip prices overshadowed improvements in flat screens.
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Semiconductor maker Advanced Micro Devices Inc.  warned on Monday that its quarterly revenue will be lower than forecast, citing softness in sales of its memory chips used in cell phones and other devices. The company's shares fell after the warning.
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Semiconductor stocks were mixed Tuesday after Advanced Micro Devices Inc. warned quarterly revenue would be lower than expected due to sluggish sales of flash memory chips used in mobile phones and other devices.
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The 1Gb DRAM (dynamic RAM) chip has replaced 512Gb DRAM as the mainstream memory capacity in the PC industry as of October, according to DRAMeXchange, a sign most PCs coming off production lines can now use Microsoft&#39;s Vista OS.All of the premium versions of Vista require&#160;more DRAM per PC&#160;to ensure smooth operation of the OS, which is more complex and requires more hardware than its predecessor, XP.The changeover in the DRAM market has taken longer than many companies expected. Several DRAM makers&#160;built new factories in anticipation&#160;Vista would take the PC market by storm this year and antiquate XP. That hasn&#39;t happened. Instead, the adoption of the new OS is moving along at a steady pace, albeit&#160;slower than the DRAM industry expected.The heavy investment in DRAM factories, however, has caused a massive oversupply.&#160;Prices of most DRAM chips have fallen&#160;by over 70 percent so far this year, and are currently near or below the cost of production for most companies.The contract price of 1Gb, DDR2 (double data rate, second generation) DRAM chips that run at 667MHz fell 12.5 percent from two weeks ago to $2.63 each, a new low for this year according to DRAMeXchange, which runs an online trading site for the chips. The most recent DRAM slump hit in early October, as prices fell by 25 percent. Analysts said the market may not turn around until late next year, and possibly later if companies keep building new production lines.&quot;We do not expect memory chip makers to show any improvement in profitability at least until [the second half of 2008] unless there is stabilization or a recovery in pricing,&quot; said Warren Lau, chip industry analyst at Macquarie Research.Samsung Electronics already increased its production line spending plans 23 percent this year, he said, and the aggressive stance will likely cause rivals such as Elpida Memory and Hynix Semiconductor&#160;to follow suit so they can protect or increase their DRAM market share.Increased spending amid a chip glut should keep DRAM cheap for a while. Market prices normally take about a month to filter down to users, according to one DRAMeXchange analyst, and users can benefit from lower prices in a few ways. PC vendors often increase the amount of DRAM per computer when prices are low, or offer additional DRAM as an incentive to buy a new PC. Also, the price of DRAM modules found in stores will fall as retailers clear out their older, more expensive inventory.Contract DRAM prices are renegotiated every two weeks between DRAM makers and PC vendors such as Hewlett-Packard&#160;and Dell. Around 80 percent of all DRAM is sold by contract, while the rest is sold on a spot market similar to commodities trading in oil and gold.&#160;
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DRAM and CPU price drops will slow growth of the global market in 2007, analysts say.
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SAN FRANCISCO (CBS.MW) -- Shares of National Semiconductor fell more than 7 percent in pre-open trading Tuesday after the analog chipmaker lowered its fiscal second-quarter financial targets due to weak demand and high inventory.
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Capitalizing on the DDR2 market momentum -- a market expected to grow from 11 percent this year to 50 percent by the end of next year according to Gartner Dataquest -- Seoul, South Koreaâs Samsung Electronics Co.
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Considering the devastating two years Advanced Micro Devices Inc. has endured, investors braced themselves for more bad news in the fourth quarter after rival Intel Corp. disappointed Wall Street with lackluster results.
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According to a Samsung release, the device is the most advanced graphics double-data-rate synchronous DRAM available for graphics card makers, as well as game console manufacturers.
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Advanced Micro Devices Inc.  , the No. 2 microprocessor maker, warned on Monday that  it will likely miss its quarterly revenue target as it loses  market share among computer resellers, a traditional bulwark of  its business.
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SEMICONDUCTOR maker Advanced Micro Devices has warned its quarterly revenue will be lower than forecast, citing softness in sales of its memory chips used in cell phones and other devices.
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Three more Taiwanese chip makers plan to&#160;spend significantly less money on new factories and equipment&#160;this year as a DRAM (dynamic RAM) glut and uncertainty about the global economy weigh.Lower capital spending forecasts in the chip industry are a sign the global IT industry is on edge about future demand. Analysts have expected DRAM makers to cut back on spending for a long time due to&#160;falling chip prices. Prices for mainstream DDR2 (double data rate, second generation) chips remain below production costs, and most DRAM makers have reported losses for the fourth quarter.Powerchip Semiconductor, Taiwan&#39;s largest memory chip maker, Wednesday said it plans to spend NT$35.1 billion (US$1.09 billion) on new chip factories, technology and production line equipment this year, less than half the NT$86.3 billion it spent last year.Powerchip&#39;s smaller rival on the island, ProMOS Technologies, also more than halved its projected 2008 capital spending to US$800 million, down from US$1.84 billion last year. The company also put the expansion of its fourth 12-inch factory on hold pending a rebound in the DRAM market.United Microelectronics (UMC), the world&#39;s second largest contract chip maker, forecast its 2008 capital spending at US$500 million to US$700 million, down from US$900 million last year.The company&#39;s customers have turned cautious due to global economic worries, said Jackson Hu, CEO of UMC, at an investors&#39; conference in Taipei on Wednesday. The company forecast its chip shipments will decline as much as 15 percent in the first quarter, compared to the fourth quarter of last year as chip demand weakens, particularly for communications chips.Global semiconductor equipment spending is forecast to fall 9.9 percent to US$40.3 billion this year, from US$44.8 billion last year, according to Gartner. The market researcher blamed over-investment by DRAM makers in 2007 for the cutback in semiconductor capital spending this year. Concerns about a U.S. economic recession have also put chip makers in a cautious mood, Gartner said in a report published early this month.&#160;
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Europe&#39;s second-largest chipmaker Infineon Technologies AG has disappointed the market after its year-end results were lower than expected, hit by record antitrust fines and other charges.
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With Christmas just 11 days away, you have to wonder what Hector Ruiz is going to find under his tree. It&#8217;s been a terrible year for Advanced Micro Devices, and the chipmaker&#8217;s analysts conference on Thursday did nothing to spread holiday cheer.Confirming what many in the chip world had suspected for some time, CEO Ruiz and other AMD execs fessed up that bugs in its new quad-core Barcelona server and Phenom desktop chips will&#160;delay these key next-generation technologies.The technical problems will delay general availability of the fastest version of the chips for three or four months. Customers willing to settle for slower clock speeds will be able to get the processors sooner; for example, AMD will ship a 2 gigahertz version of the Barcelona first, instead of the expected 2.5 gigahertz speed. In either case, the chips will be close to a year late; the original target date was the first quarter of 2007.AMD STUMBLES AS INTEL SPEEDS AHEADThe problem couldn&#8217;t come at a worse time. AMD has struggled all year to close the performance gap between its high-end chips and Intel&#8217;s. Barcelona, the company had promised, would restore its technical supremacy. Indeed some analysts said they had expected the quad-core server chip to do just that. &#8220;At 2.5 gigahertz it would have beaten any Intel products,&#8221; said analyst Nathan Brookwood of Insight64. &#8220;But at 2 gigahertz, it&#8217;s bringing up the rear,&#8221; he said.Intel, meanwhile, has corrected many of the problems that dogged it earlier in the decade. &#8220;AMD isn&#8217;t competing against the Intel of two years ago,&#8221; said Dean McCarron of Mercury Research. Intel has had quad-core chips in the market for about a year. To be fair, its chips are based on a somewhat simpler design; Intel gets to four cores by packaging two dual-core chips together. By contrast, AMD&#8217;s design integrates four cores on one chip, a more efficient solution, said McCarron. Except that AMD&#8217;s approach reduces yields and thus raises manufacturing costs, he added.There was earlier speculation that Barcelona&#8217;s problems were related to the ATI graphics chipset, but the problem turns out to be deeper, at the chip level. AMD has said it is related to the translation lookaside buffer (TLB) in the processor&#39;s L3 cache.DOUBTS ABOUT A QUICK FIXIn the Thursday conference, analysts had expected discussion of the company&#8217;s &#8220;asset light strategy,&#8221; which will apparently entail outsourcing more manufacturing to foundries such as Chartered Semiconductor or TSMC. But they didn&#8217;t get it, and the lack of details made CEO Ruiz&#8217;s promise to return to profitability in 2008 less credible to Wall Street. AMD&#8217;s financial performance has been terrible, losing money for four straight quarters. Part of the reason: Intel and AMD have engaged in a bloody price war, a struggle that has been very tough on the smaller company&#8217;s profit margins. But the Barcelona and Phenom delays are serious self-inflicted wounds.AMD&#8217;s stock lost another few points yesterday and has now shed about 40% in the last two months and a bone-jarring 56% since the beginning of the year. At $8.84 a share, Thursday&#8217;s closing price, the stock is at its lowest ebb since the summer of 2003. Ironically, AMD has so far&#160;rewarded Ruiz with pay raises.
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Applied Micro Circuits Corp., a communications chip maker, on Thursday said it expects lower second-quarter revenue compared to its first quarter, based on soft sales in Asia and lower orders.