Tech:Conference takeaways
WHAT’S THE STORY.
May is a critical month for the tech sector, as 1H performances and supply chaininventories are key in determining 2H outlooks. Historically, investor excitement hasportended a sell-off, while worries have signaled room for more buying.
Tech was an obvious darling at last week’s Samsung Global Investors Conference. It waseasy to arrange meetings, and investors were happy with returns thus far—but we saw nosign of irrational exuberance after solid 1Q results. Questions focused on the sustainabilityof a sector upturn, capex discipline, and demand drivers such as big data. Companiesoffered bright guidance for 2H but warned investors not to get too excited.
Post-conference, two of our five analysts said they believed the sector would keep rallying,while three felt expectations have become slightly excessive. We see this as evidence ofnervousness in the market, and against this backdrop foresee more upside for the sector.
Memory semiconductors.
Samsung Electronics (SEC) and SK Hynix said memory semiconductor prices have beenrising in 2Q and expect DRAM prices to rise further or at the worst stay flat this quarter—we predict a 3% q-q drop. The chipmakers said the use of more memory per box isnegating weak handset sales in China and server-semiconductor demand is fairly strong.
SSD content per service has jumped more than 50% y-y amid fierce competition to securedata and upgrade demand (all-flash storage). DRAM content per server is also increasingat a mid-20s percentage rate, outpacing DRAM demand growth of around 20% y-y.
Investors asked when heavy NAND investments will begin to increase supply, to whichKorean companies explained that investments had been made to construct buildings, andnew production lines will be brought online from 2019 depending on market conditions.
Questions about the sustainability of earnings are likely to grow as analysts raise forecasts,but we believe the boom will last at least through 2018, and maintain BUY on SEC andHynix.
Displays.
SEC expects TFT panel prices to fall in 2H as Chinese players start mass production, whileLG Display sees prices per shipment area holding up on growing sales of high valueaddedproducts (eg, UHD). Their views were little changed pre- and post-conference.
Meanwhile, OLED capacity is expanding and expectations for the technology remain high,but we believe order momentum at equipment firms will slow after a concentration oforders was received in 1Q. SEC’s A4 line investments still remain unclear. We remainmore conservative on the display segment than the memory segment.