This is, of course, bad news if you’re in the business of making the commodity Dynamic Random Access Memory chips that go into PCs, servers and smartphones. A state of oversupply coupled with weak demand means the chips command lower prices than they otherwise would. The situation can be good, however, if you’re buying computers, because memory upgrades get cheaper.

The problem, as related by the research firm IHS iSuppli, is a rise in inventories of chips that its analyst Mike Howard describes as “alarming.”

ISuppli measures how much unsold inventory the chipmakers themselves have in their warehouses — which include Micron Technology in the U.S., Elpida in Japan, and the South Korean pair of Samsung and Hynix. The higher the number is, the more intense the downward price pressure becomes.

The stockpile of DRAM chips as of the end of the third quarter of 2011 stood at 12.8 weeks, which is nearly a third higher than it had been three months earlier and double what it was in early 2010. It’s also a lot higher than the typical average of 9.2 weeks.

There are a lot of factors creating the glut. Tablets like the iPad and Kindle Fire are eating into notebook sales, and don’t require nearly as much DRAM as notebooks do. And new operating systems don’t require the incremental boost in onboard memory as had been typical.

Nor is the economic uncertainty caused by the sovereign debt crisis in Europe helping. Flooding in Thailand has also disrupted the supply of hard drives which has in turn affected the overall demand for PCs and servers. Computer makers who can’t get hard drives simply won’t build as many computers, and thus won’t be buying the DRAM they otherwise would be.

Something similar happened in 2008 when the global recession sapped computer demand and caused a pileup of DRAM chips that lasted nine quarters. This cycle could turn out to be worse, iSuppli says.

Overall, iSuppli reckons the market for DRAM chips was worth about $6 billion in the fourth quarter of 2011, down by 11 percent from the prior quarter, and it’s only heading further south. The worst, Howard says, is apparently yet to come.

If the economy turns upward, or even is perceived to be on the mend, the glut can work its way down pretty quickly. In 2009 the stockpile dropped by more than half over three quarters.

And if it seems obvious that these chip companies should just stop making DRAM and let demand catch up with supply, it’s actually not that easy. Chip factories, or fabs, contain billions of dollars worth of manufacturing equipment running processes that are difficult to stop and start. Also, it’s more expensive to have them sitting there doing nothing but depreciating than turning out a product that brings in revenue, even if it’s running at break-even or a slight loss.

While for tax reasons it’s probably more likely that HP will spin the unit out as an independent company — there are no taxes when assets are distributed to shareholders — Sterne Agee analyst Shaw Wu, in a note to clients issued this morning, breaks down the possible suitors should HP opt instead for a sale.

Topping the list is Samsung, which you might have guessed already. Samsung would make sense, Wu argues, given its “large size and global ambitions.” Samsung has been trying to build a PC business since 1997, when it acquired AST Research, but hasn’t gotten anywhere. But it is the world’s biggest manufacturer of DRAM memory chips, used in PCs; and the largest supplier of NAND flash memory, which forms the basis of solid-state drives that are increasingly built into notebook PCs. It’s also a big maker of LCD displays and notebook batteries. All that vertical integration, combined with HP’s consumer PC footprint — it’s the biggest supplier to Best Buy — would make Samsung the worldwide player it has always aspired to be.

Don’t ignore the other players, though. Acer, Lenovo, Sony and even Dell could all conceivably show up with a bid, Wu writes. But it will all come down to HP’s asking price, and what parts of the business are included. Wu pegs HP’s PC business as being worth $8 billion, or about $3.66 per HP share. To calculate that valuation, he assumes a premium of five times profit of $1.6 billion on $40 billion in revenue; a five percent operating margin and a 22 percent tax rate.

One potential issue to watch in a possible Samsung bid: Whether the South Korean giant asks HP to include its webOS software. Samsung is also a huge supplier of smartphones around the world, and would probably like to rely less on Google’s Android than it does now — and would want to own its own operating system. Having decided to kill the webOS hardware business, HP has indicated that it has plans to keep the software alive in some form, though enough cash from Samsung might change HP’s mind.

Wu also argues that the market has gotten too negative on the PC business in general. While it’s true that Apple’s iPad has left a historically significant mark on the PC universe, PCs aren’t dead yet — just ask Intel. Give them iPad-like touchscreens and flash drives for instant-on capability, and the market might rebound, he says. “We believe longer-term tablets and PCs are the same market. Ironically, we view Apple’s MacBook Air as the first generation of these future hybrid PCs.”

Update at 9:38 AM PDT / 12:38 PM EDT: Samsung just issued a brief statement saying it’s not interested in HP’s PC business. Such rumors are “not true,” the company says. Well it’s really not a rumor exactly, but speculation really. Somehow I don’t believe it’s the last word on the subject.

(Image, obviously, is from the sheet music of the number “Who Will Buy?” from the musical “Oliver!” Hear it below.)

Elpida — Japan’s only maker of dynamic random access memory, or DRAM, chips — said the new one-gigabyte package containing four stacked chips is the world’s thinnest DRAM package of its kind. The chip package, designed for smartphones and other mobile devices, is 0.8 millimeter thick, compared with existing similar packages that are one millimeter thick, the company said.

Elpida plans to start mass producing and shipping the new chip package from the July-September quarter.

Read the rest of this post on the original site »

Manufacturing has stopped at Shin-Etsu Chemical Co. Ltd.’s Shirakawa facility, and MEMC Electronic Materials has stopped manufacturing at its plant in Utsunomiya. Together, the two facilities account for a quarter of the global supply of silicon wafers, the basis of building chips.

The Shin-Etsu Chemical plant by itself supplies about 20 percent of the world’s silicon supply, and it specializes in making 300-millimeter wafers, which are the dinner-plate-size discs of silicon used in the more advanced chip factories, commonly referred to as fabs. Shin-Etsu, iSuppli says, supplies several memory chip manufacturers, particularly those that make flash memory, used in everything from iPhones to memory cards, and also DRAM, the main memory used in PCs and servers. ISuppli says the global market is going to be hit hard, which in turn means you can expect prices on both flash and DRAM to soar. Shin-Etsu has said it would set up production at other plants, but it’s hard to know how long that will take.

MEMC’s Utsunomiya facility accounts for five percent of worldwide wafer supply. MEMC said it expects that shipments from this facility will be delayed during the near term.

In a related note, iSuppli has quantified the impact of the shutdown of operations at Mitsubishi Gas and of Hitachi Kasei Polymer. The two companies produce about 70 percent of the world’s supply of the raw materials used to make printed circuit boards. The key material in question is called copper-clad laminate or CCL. The two companies say they’ll be able to ramp production back up within two weeks. The good news is that electronics manufacturers have enough circuit boards in inventory that they can probably keep their operations running without interruption.

ISuppli goes on to check in on a few chip companies in the affected region: Elpida Memory says its fab in Yamagata has been damaged, and the lack of electricity is hurting production. It’s running at about half its normal capacity.

The quake also damaged about 40 percent of the production capacity of Renesas Electronics. Production has stopped at its Tsugaru fabs where it makes analog and discrete chips, at its Naka fab where it makes system-on-chip and microcontrollers, and at its Takasaki and Kofu fabs, which also making analog and discrete parts.

Half of Fujitsu’s production capacity has been damaged. While its fabs and wafer equipment are intact, the lack of power, gas and wafers have slowed things down considerably, and it expects to recover in about three to four weeks.

One company that is holding up well: AKM Semiconductor, notable for the compass chips it produces for Apple that are used in the iPhone and iPad 2. Its main production fab in Nobeoka is well out of the quake zone and hasn’t suffered any loss of power.

However, even most hard core techies can’t tell you how much DRAM is in their phones or tablets. They might know about the flash memory that is used to store apps and music. But most would shrug their shoulders if asked how much memory is in there to power things like video playback and multitasking.

Crack open any smartphone or tablet, though, and you will find significant amounts of DRAM (an acronym that stands for Dynamic Random Access Memory). It is that memory that, as with a PC, allows a computer to handle multiple tasks quickly. On the cell phone side, it also has to perform its task while using as little power as possible. That has created a market for low-power chips–so-called mobile DRAM.

“I call it the silent enabler,” said Mueez Deen, a director in Samsung’s mobile memory unit (pictured above). “Nobody asks for it but you need a lot of it.”

Indeed, the market for such memory has been exploding. Mobile DRAM shipments this year are seen reaching 2.9 billion gigabits, up from 1.7 billion gigabits last year, according to IHS iSuppli. Some of that is due to the rapid growth in the number of smartphones being shipped, while another chunk is due to the fact that the amount of memory needed in each phone is growing. By 2014, smartphones are seen consuming 36 times as much memory as they did last year.

“Mobile DRAM, up until 2009, was kind of a sleepy backwater of the DRAM (market),” said iSuppli’s Mike Howard. “Phones weren’t really doing a lot back then.”

That is clearly changing–and quickly. Today’s smartphone is trying to juggle between desktop-caliber Web browsing, video chat and even 3D gaming–all of which demands ever more memory.

Not that long ago, it was considered ample if a phone had 512 megabits or a gigabit of flash memory. Now, four gigabits isn’t uncommon for high-end smartphones. Some, like the Atrix, pack eight gigabits of flash and smartphones with 16 gigabits are on the horizon, Deen said.

At the beginning of 2009, DRAM chips that were customized for mobile devices accounted for about five percent of the overall market, in terms of number of bits. By the first quarter of last year, its share had tripled. Its share is poised to grow even further as smartphones continue their rapid growth, while PCs tend to grow 10-12 percent a year at best.

Tablets will increase the mobile DRAM market even further. Although smaller in number than smartphones, tablets tend to use even more memory per device. And given the need for good battery life, mobile memory chips are still a requirement. Slates are seen accounting for 3.5 billion gigabits of DRAM in 2014–ten times what they accounted for last year.

For the memory chip makers, mobile DRAM has been a bit of a respite from the roller coaster of the PC memory market, which sinks or swims based on how much capacity is out there. On the mobile side–at least so far–handset makers have been dealing directly with chipmakers, with most of the chips being built to forecast demand, meaning much more stable pricing. Currently, chipmakers are getting anywhere from two to two and a half times as much for mobile DRAM as they would for the same capacity PC chip.

Roughly speaking, Samsung has about half the market for mobile DRAM, according to iSuppli, while Hynix has a quarter of the market, Elpida about 20 percent and Micron around 5 percent.

So, if mobile DRAM is such a big market, why does it never get talked about. In large part, it is because it is invisible to the consumer. It’s not something that gets talked about and handset makers simply choose the amount they think is appropriate for the device they are building. And, unlike a PC, it’s not like users can crack open their phones and add more if they like.

Apple, for example, doesn’t even say how much DRAM is in its new iPad. However, tear-downs reveal it to be 512 megabytes (UPDATE: I initially had my bits and bytes confused here). Interestingly, that amount is half of what is crammed inside rival tablets from HP, Research In Motion and Motorola.

Howard figures that Apple is probably somewhat better able to use its memory given its hardware-software integration and also says the company also is aiming to provide just enough performance while still hitting key price points. (Most iPad rivals tend to have a higher bill of materials than Apple has for the iPad.)

That said, Howard also said that the added memory is giving the other tablets a boost.

“It hasn’t gone to waste,” he said. “The DRAM is definitely adding a lot of performance.”

But the teardown that Wall Street and the investment community is waiting on is the one from the market research firm IHS iSuppli, whose team spent all day Saturday in a furious effort to dissemble a 32-gigabyte iPad 2 and estimate the cost that Apple paid for every component. They gave me an exclusive early look at their findings.

The point is to form a partial picture of the gross profit margin on every unit, a figure that Apple generally keeps to itself. This information is useful to investors and analysts who then factor the findings in with other assumptions they use to predict how much of a profit Apple is going to report over the next few quarters.

The headline of iSuppli’s teardown researcher is always the estimated bill-of-materials cost, which is the sum cost that it thinks Apple has paid for all the hardware inside the iPad 2. It doesn’t take into account the cost to develop software, or other things like packaging, shipping and distribution, or manufacturing.

In this case the estimates are for the 32-gigabyte, 3G version of the iPad which sells for $729, and there are two estimates, one for the AT&T version–$326.60, and one for the Verizon Wireless version–$323.35. Some of the wireless chips used in the AT&T version are a little more expensive or require an extra part. For example, on the Verizon version, GPS is integrated with the Qualcomm-made wireless baseband chip. On the AT&T version, an extra GPS chip had to be added along with the Broadcom-made Bluteooth and Wi-Fi chips, adding an extra cost of $1.50 per unit.

The baseband wireless chips were naturally different because AT&T and Verizon use different wireless technologies. Intel, the new owner of the former wireless chip division of Infineon, supplied the main wireless chip in the AT&T version, with supporting chips coming from TriQuint Semiconductor and Skyworks for a combined cost of $18.70.

Qualcomm supplied the main wireless chip Verizon version, with supporting chips coming from Skyworks, Avago Technologies, and Murata for a combined cost of $16.35. While there had been some speculation that Apple had used a Qualcomm chip in both versions, but it turned out not to be the case.

Aside from the wireless chips, the components are otherwise identical across both versions. Both sport Apple’s A5 chip, and iSuppli says that Samsung is still manufacturing it for Apple at a cost of $14. While there had been some talk in recent weeks that Apple was moving its chip manufacturing contract to Tawain Semiconductor Manufacturing Corp, there’s no evidence that it has made such a move, at least not yet.

The most expensive component by far is the touch-sensitive display, coming at $127. ISuppli says that the LCD portion the unit they tore apart was built by LG Display, but Apple is known to use other sources for displays, including Samsung, and possibly ChiMei Innolux. The glass assembly covering the display is thought to come from TPK or WinTek. ISuppli says costs on the display are going up because manufacturing yields on LCDs have been lower. Apple is also thought to be using a more expensive glue to improve the efficiency of the process of bonding a new thinner type of Gorilla glass to the display.

Samsung supplied Apple with the NAND flash memory used in the iSuppli sample, holding on to a relationship that goes back several years to the days of the first iPod nano, though Toshiba is also known to supply Apple with flash. It is the world biggest consumer of flash memory, after all. Elpida supplied the DRAM memory. ISuppli estimates the combined cost of memory, both flash and DRAM plus a Micron-made MCP memory chip at $65.70.

Then there’s a set of components seen in the iPad 1 that remained the same in the iPad 2. STMicroelectronics supplied the gyroscope and the accelerometer, and AKM Semiconductor supplied the electronic compass. Broadcom supplied touch interface chips, while Texas Instruments supplied a touch screen driver chip. Analog Devices supplied a capacitive touch controller.

Finally there are the two cameras. ISuppli hasn’t yet named the suppliers there, though the usual candidate is Aptina, the former camera unit of Micron, though it’s possible that Apple sources them from more than one place.

ISuppli’s estimates are a lot higher than the findings of another teardown shop, UBM Techinsights. The Wall Street Journal reported that UBM’s cost estimate is about $270, but that estimate was made before it conducted its actual teardown, and didn’t change once it had.

But one company, Kaminario Inc., whose backers include Sequoia Capital, is solving that problem with the more powerful dynamic random-access memory, or DRAM, which has been standard in personal computers for decades.

As the price and performance of flash have moved in opposite directions, it’s not surprising to see several start-ups using it to replace hard-disk drives, but building a storage system around DRAM is a less obvious bet. Though it’s exponentially faster than flash, DRAM is volatile, meaning when the power goes out, your data is gone.

Read the rest of this post on the original site

DRAM is the ultimate commodity chip market, and its boom-or-bust cycles are legendary. When demand picks up, manufacturers like Samsung, Hynix and Micron always rush to add manufacturing capacity–prices pick up; chips become scarce.

Everything seemed to be going well for the chip companies until the third quarter of 2010. After five straight quarters where the average price for a DRAM chip increased, it suddenly turned south as demand for notebook PCs slacked. That’s in line with what Gartner and IDC reported yesterday about the PC market.

There’s good news for consumers, however. All that stacked-up inventory has to go somewhere. If you’re planning to buy a notebook this year, the base models will now start shipping with four gigabytes of memory instead of two. And for those who bought a machine with only two in the last year or so, upgrades will be more affordable.

The one bright spot for the memory companies? You got it: Smartphones and tablets. Memory content in phones is expected to increase by nearly two-thirds. And the 57 million tablets that iSuppli expects will ship this year will also need some DRAM. More details here from iSuppli.

Memory chips, both DRAM and Flash memory, had a lot to do with this. DRAM sales grew by 80 percent, and Flash memory grew by 40 percent. But every market segment save for one saw double-digit growth. Good news for Samsung, Micron and Hynix.

The one thing I’ve learned in watching chip markets over a dozen years or so is that booms don’t last. ISuppli is predicting a much slower growth rate of 5 percent for 2011.

For the past 15 years or so, most of the action has been in packing hundreds or thousands of PC-style microprocessors into supercomputers called clusters. More recently, some researchers have been trying to boost performance further by adding graphics chips, which each have hundreds of specialized processors. A system from China, for example, this month took the No. 2 spot on a semiannual ranking of the 500 largest systems–historically dominated by supercomputers in North America–by using a combination of Intel (INTC) microprocessors and Nvidia (NVDA) graphics chips.

But it doesn’t make sense to have ultra-speedy calculating engines if they have to wait around for the equivalent of fuel–the data they need solve problems. So engineers also keep trying to design faster connections between microprocessors, and to connect them with chips called DRAMs (dynamic random access memories) that serve as a temporary scratch pad for data and the disk drives that provides longer-term storage for information.

Read the rest of this post on the original site

The electronics giant, which recently posted upbeat earnings and forecasts, was one of several chip makers slapped with steep fines by the European Commission for price fixing.

It faces the heaviest fine–145.7 million euros (US$182 million)–while rival Micron Technology (MU) got off the hook by cooperating with authorities in the investigation.

Along with Samsung, eight other chip makers, including Germany’s Infineon Technologies, South Korea’s Hynix Semiconductor, Taiwan’s Nanya Technology, and Japan’s Elpida Memory and Toshiba, were fined a combined 330 million euros. The chip makers and analysts say it’s no big deal.

That’s because the market for dynamic random access memory, or DRAM, is booming as replacement demand from consumers and corporations for PCs is picking up. Capital spending over the past two years remained weak, curtailing global supply. Chip prices have held firm so far this year, enabling the likes of Samsung and Micron to post strong profits so far.

Read the rest of this post on the original site

The case in San Francisco County Superior Court centers on allegations by Rambus that Micron Technology Inc. (MU), Samsung Electronics Co. and Hynix Semiconductor Inc. illegally conspired to boycott technology developed by Rambus and took other actions to block its acceptance. It is hoping to win billions of dollars in damages from the case. The three companies deny the allegations.

Rambus, of Los Altos, Calif., licenses patented technology that is used to accelerate the performance of memory chips, including products known as dynamic random-access memory, or DRAM, that are a mainstay of personal computers. The company’s history has been marked by litigation, including patent battles with numerous chip makers and an antitrust case against the company by the Federal Trade Commission that was rejected by an appeals court.

Read the rest of this post on the original site

Industry heavyweights and observers see the notoriously up-and-down industry turning positive this year. Weak capital investments over the past two years have led to a gradual decrease in global supply of dynamic random access memory chips, which are the main chips used to store data in personal computers. The decrease in supply, coupled with improving demand, has led to a recovery in prices of DRAM chips in recent months.

The launch of the new Windows 7 operating system from Microsoft Corp. (MSFT) may also prompt consumers and corporations to replace their aging computers with new ones that require more memory storage next year, providing a much needed demand boost for DRAM makers.

The recovery in the DRAM market, while a sign that demand in the electronics supply chain is improving, could put pressure on PC manufacturers to trim their component costs to maintain margins.

Read the rest of this post on the original site

As I noted last night, AMD said on its post-earnings conference call with the Street that it expects a less-than-seasonal sequential increase in Q4 revenues, due in part to the “the big build we’ve seen of PCs in anticipation of the Win 7 launch.”

That has triggered concerns that the PC industry has built too much inventory–and that it could result in both reduced component consumption in Q4 and beyond, and lower pricing for memory, which has benefited in recent weeks from higher NAND and DRAM prices.

Read the rest of this post on the original site

If that’s the kind of thing that makes you happy, then you would love today’s call, in which the exact same thing happened again. Twice! From my transcription/paraphrase this afternoon:

Q: What about getting into the low priced/netbook category?

Apple COO Tim Cook: “Our goal is not to build the most computers, it’s to build the best. Whatever price point we can build the best in, we will play there. At this point, we don’t see a way to build a great product at that price point, $399, $499.” We think many customers buying those find themselves “disenchanted” after buying cheapo/netbooks.

Q: Do you think there is an emerging market for a “truly mobile device” with a larger screen, a market big enough that you may want to participate?

Cook: “Never want to discount anything in the future,” and never want to answer specifically your question about new products. [Duh.] But boy, do we think netbooks are lousy, and we think customers agree.

Two things here:

1. Apple has a history of disparaging products and markets right before they unveil their own. So it’s not unreasonable for analysts to keep asking about the prospects for a supercheap Mac laptop. But Apple really is emphatic about its distaste for these machines.
2. Apple is not ruling some sort of device that’s more expensive than a netbook and less expensive than a $999 MacBook…and may have a big touchscreen…and is bigger than an iPhone, etc. Something, perhaps, like an $800 iTablet. We’ll see.

EARLIER:

Joining call late; analysis of Q3 results here.

Reading from prepared statement:

• Eight billion songs purchased and downloaded from iTunes store.
• Slight uptick at Mac retail stores. 50 percent of Macs sold at stores to customers who didn’t own Macs before. 258 stores. 27 store remodels.
• Gross-margin improvement: Component cost increase not as high as expected; weaker U.S. dollar helped.
• Cash pile: Will be invested in short-term investments. First week of Q4, made $500 million payment to Toshiba for future supply of NAND flash memory.

Q&A:

• Please talk about your relationship with wireless carriers (i.e., when will you dump AT&T (T) for Verizon (VZ). Tim Cook: “I think that most of the carriers we’re doing business with are thrilled with lower churn…and, of course, their customers are demanding the iPhone.” Do you see opportunity beyond the iPhone, like data plans for laptops with AT&T? “Nothing to be announced today.” How’s your relationship with AT&T? “I think it’s an excellent relationship and we’re very happy with it.”
• Discussion of education and professional market for Mac laptops/PCs–both affected by economy more than consumer market, i.e., schools and corporations are less likely to spring for shiny new Macs than Joe Sixpack.
• How is the $99 iPhone performing? As we made changes–launch of 3Gs and lower-priced iPhones–we saw acceleration of unit sales. But won’t break down mix. Supply of phones has been “constrained” and demand is robust. Opportunity for enterprise sale? Big opportunity. Doing well with small business, and with big corporations and agencies where employees can purchase for themselves.
• Guidance details? No change in thinking regarding guidance offerings. We usually see an increase in Mac units from June to September, but we think the sequential increase will be less than in previous years since we’ve refreshed our lines a while back. Also, education sales are “under pressure from budget shortfalls.” Same thing with the iPod: We think we’ll see a decline for regular players but an increase for the iPod touch. Seasonality makes projections a little funky this time around given timing of product launches.
• Channel inventory for iPhone lower is than we would like; there are 1.83 million phones in inventory.
• Given the $999 MacBook and price cuts for the Mac line, is the MacBook more or less elastic than anticipated? As we expected, some people are now buying up, because they can get the Macbook Pro for $1,199, down from $1,899. “We’re not thinking fundamentally different about the Mac business than we were before.” If we can build great Macs at lower prices, we will, but we won’t put the Mac brand on products that aren’t up to our standards.
• Update on Snow Leopard? Why such a low price point? Snow Leopard is priced aggressively so that all our users can upgrade to it, and we expect that they will. What commodity prices are you worried about, what should we think of the Toshiba prebuy? Are others coming? The market for DRAM and large-size LCDs has “shifted to constrained environment” and prices have moved accordingly. The NAND supply is getting better. We have a long-term supply agreement with Toshiba. We view flash as key component because we use it in so many products, and we’re a big consumer on a worldwide basis. We’re always open to similar deals. We’ve done one with LG on LCDs. We may do others, but we’re not working on one now.
• Please talk more about consumer demand for lower-priced laptops. No details forthcoming. But on macro level: Once price changes, people are upsold from $999 unit to $1,199 unit. [We just heard that.] Prior to change, we had seen people leaning toward the $999 product. What about pricing on iPhone side? Sounds like $99 3G iPhone helped drive traffic to the $199 3GS iPhone. Was that the plan? We’re focused on total iPhone units. So we’re psyched about 5.2M iPhones sold. Also, take note that the 3GS is in short supply and not available in all territories. Also, early in cycle, you have more upgraders, and upgraders are more likely to get higher priced phones. Still, too early to tell about product mix.
• Competitors are now finally coming out with rival app stores–Pre (barely), BlackBerry, etc.). What are you up to in answering back? Well, we just launched OS 3.0. That’s pretty great. It has an Installed base of 45 million (iPhones and iPod touch). We have a gazillion apps. According to the latest numbers from Nokia (NOK) and RIM (RIMM), they have a couple thousand each; Android has maybe 5,000. “We feel extremely good about our competitive position and continue to believe that we’re light years ahead of other people.”
• What about getting into the low-priced/netbook category? Tim Cook: “Our goal is not to build the most computers, it’s to build the best. Whatever price point we can build the best in, we will play there. At this point, we don’t see a way to build a great product at that price point, $399, $499.” We think many customers buying those find themselves “disenchanted” after buying cheapo/netbooks.
• Is the carrier network strong enough to handle all the apps and the more robust apps you’re coming out with every day? Non-answer. Do you think you guys will make investments on the side to take pressure of carrier-capacity issues? No plans. When we entered business, we looked at it, decided what we could do well was deliver the handset. I think there are other people that have more skills in the network area, and I think we have a lot of those partners.
• Back to netbooks and things like netbooks, but better, like the iTablet: Do you think there is an emerging market for a “truly mobile device” with a larger screen, a market big enough that you may want to participate? Cook: “Never want to discount anything in the future,” and never want to answer specifically your question about new products. [Duh.] But, boy, do we think netbooks are lousy and we think customers agree.
• Any info on iPhone sales split between new buyers and upgrades? Nope. Okay, how about the app store? It looks like prices are in a “race to the bottom”; there are lots of 99 cent apps. Are you worried about that? And can you help customers distinguish between good ones and “garbage”? Cook: “We realize there’s further opportunity for improvement” regarding promoting quality apps, etc. Regarding price: It’s up to the developers. As the installed base grows, it makes more sense to have lower prices, but that’s up to the developers.

Call finished.

Read the rest of this post

In a research note this morning, Lehman’s Korea-based chip analyst, C.W. Chung, said that DRAM contract prices in the first half of September are set to decline another 10 percent, following a 10 percent drop in the second half of August. And Chung sees a further fall in the second half of September.

Chung says PC makers recently have been lowering their outlook for the second half, effectively reduced DRAM demand. He also says that those companies now have greater negotiating power to push DRAM prices lower.

Read the rest of this post

“While we continue to believe the DRAM industry should see further improvements in demand in [the second half], we also think the fragility and sustainability of the current DRAM sector recovery is once again in focus, given concerns for further global macro economic slowing and the potential for NAND capacity conversion to DRAM,” he writes.

Read the rest of this post

One clear message from the Applied Materials’ (AMAT) earnings call yesterday is that there has been a dramatic reduction in capital investment in the DRAM and NAND memory chip sectors.

Read the rest of this post