Apple mobile DRAM report

The Korea Times reports Samsung (OTC:SSNLF) has struck deals with Apple and LG to supply DRAM for upcoming phones, with Samsung handling "at least half" of Apple’s DRAM needs for the iPhone 6S. With the help of iPhone related orders, Micron’s share rose to 23.3% from 19%; SK Hynix’s share rose to 28% from 27.6%. Samsung is generally seen as the most aggressive of the big 3 DRAM vendors in terms of growing production.

Looking at the reality, Iphone 6 has only 1GB RAM. Once it is going to upgrade to 2GB or above, that’s 100% increases in DRAM requirements. Even given all these 100% increase to Samsung (obviously, MU doesn’t have the capacity to support this kind of upgrade if they are already selling everything they produce), it doesn’t drop the amount of DRAM MU will provide to AAPL. So, until we can see how the math works out, this rumor doesn’t provide enough detail if this indeed hurts MU. On the other hand, I see it as positive that AAPL indeed going to increase their demand (100% or more), as long as the price is good and supply is tight.

The Apple iPhone 6S is going to be the very first handset from the Cupertino firm to feature a faster 2 GB LPDDR4 RAM. The iPhone 5 came with 1 GB of RAM and since then all the handsets that have arrived after it are featuring the same amount of RAM. However, the iPhone 5S came with an upgraded memory technology the LPDDR3 instead of the LPDDR2 1 GB of RAM present inside the iPhone 5. The LPDDR3 RAM is also present under the hood of iPhone 6 and the iPhone 6 Plus phablet.[.]The next edition of Apple smartphone that is rumoured as iPhone 6S is expected to arrive with 2GB of LPDDR4 RAM. It has been revealed Apple will be hiring Hynix, Samsung and Micro Elpida to manufacture the LPDDR4 RAM for the next iPhone.

Hynix is expected to manufacture 50 percent of the 2 GB LPDDR4 RAM, 30 percent of the new RAM units will be built by Samsung and lastly Micron Elpida will handle the remaining 20 percent order. It adds among the three, Microsn Elpida was the one that had faced low production issues but there is no such issue now. Stock is down 6% on some rumour, this does not make any sense.

That said current volume is 31.7mn vs 22.9mn average, it is more likely that somebody is unloading a position in size, Baupost and Greenlight have both reduced slitly in the 13F fillings for Q4, may be they are the ones who are selling today, but why so aggressively? Does not make sense.

Either way fundamental story is intact, I would ignore this market move until there is more clarity.

This is just a guess, but I’m thinking that MU management was not taken by surprise by this development. Given the general direction the company is moving, I would think that they are not fretting, either. Sorry about that.’ Anyway, that is what it feels like from the peanut gallery.

The Korea Business Times article was out there yesterday morning and I assumed it was responsible for the Micron weakness yesterday. Seems reasonable that if AAPL is doubling their memory requirement and Micron has no supply, they will go elsewhere for the extra.

I think the bigger issue today is the piece from Cleveland Research that suggests Micron is seeing declines in server and PC memory. This seems pretty inconsistent with what we heard at the Micron analyst meeting a week and a half ago. I have no idea what is true, but with this stock people sell on the faintest hint of any price weakness.

Intel and Micron aren’t alone in this sprint toward the SC (System Cube) and Ball (System Ball). Samsung’s a bloody tough competitor the atmosphere in Korea is rather tense, and the spirit of competition fierce.

However, I doubt that Apple seeks to enhance Samsung’s competitive position sending money to them is like feeding a lion which occasionally bites off both food and hand. All things considered, in my estimation Apple would prefer to avoid purchasing components from a fierce end product direct competitor altogether.

But currently they make some interesting deals with the devil, trading better component prices for occasionally missing hands.

Dow Jones says that Samsung will supply "about half" of the DRAM to Apple for the new iPhone. If that is so and the January report was also accurate, then perhaps Micron will not supply any DRAM to Apple, as the January report claimed that Micron would supply about 20% and Samsung 30%. Perhaps Micron’s production issues with LPDDR4 had not been resolved. I don’t know the answer to that.

That said, there is plenty of demand for DRAM out there. I think that the drop at the opening was an enormous overreaction that managed to catch a lot of Stop Loss orders in its wake as well as typically anxious Mr. Market holders of this volatile stock. The stock is back to around $30 now. ET

Micron Drops 6%: Cleveland Sees Decline in PC, Server DRAM Prices, Demand

By Tiernan Ray

Shares of DRAM and NAND flash memory chip maker Micron Technology (MU) are off $1.94, over 6%, at $29.46, apparently prompted by a negative note this morning from Cleveland Research’s Kevin Rottinghaus, who warns of pricing pressure in DRAM.

Rottinghaus, according to a brief summary I’ve seen (Cleveland does not provide its research to press) argues that Micron has been "leading pricing down in the channel" for PC DRAM, and that contract prices have fallen below $27 from a level of $31 to $32 back in Q4.

Perhaps most worrisome, Rottinghaus believes that demand is falling based on "negative order revisions." Apparently, prices for DRAM for servers are also being lowered by Micron, he writes.

Rottinghaus opines the company is at risk of missing estimates for the current quarter and its outlook for the following quarter.

=====================I will be very interested in what MU has to say about the current prices for DRAM this morning.

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