Asia Memory-Bad memories fading

TMT
Memory Devices Technology
8 October 2010
abc
We estimate that Inotera’s 50nm technology
proportion represents around 22% of total
shipments in 3Q10, compared to the
scheduled 50%. We believe the delay will
likely affect bit growth in 4Q, where Inotera
had targeted for 100% growth.
On 42nm, Inotera will start its pilot run in late
3Q. It is expected to have mass production by
1H11.
Bit growth, ASP assumptions (%)
150%
100%
50%
0%
-50%
2008 2009 2010f 2011f 2012f
Bit growth ASP
Source: Company data, HSBC estimates
Process migration
100%
80%
60%
40%
20%
0%
2007 2008 2009 2010f 2011f 2012f
9xnm
70nm
50nm
42nm
Source: Company data, HSBC estimates
Forecast revision
On the delay of 50nm migration, lower wafer
output in 3Q as a result of prolonged cycle time,
we revise down Inotera’s 2010 forecast and now
believe significant cost savings from node
migration will only start in 4Q10-1Q11. We now
forecast 4Q10 bit growth of 51% (company
targets 100%) and 2010 bit growth of 27% y-o-y
(previously 67%). We revise down Inotera’s
2010-11e OP margin to -4% and 11%, from 6%
and 18% respectively, and expect the margin
recovery only to happen in 4Q. We now forecast
Inotera’s ASP to go down by 16% in 3Q and
another 10% in 4Q.
Forecast revision for Inotera
TWDm __ Revised ___ __ Previous ___ __Difference _
2010 2011 2010 2011 2010 2011
Sales 46,535 66,433 53,426 72,032 -13% -8%
GP (1,987.1) 7,303 3,049 13,042 nm -44%
OP (3,755.4) 5,642 1,125 11,385 nm -50%
Net income (5,495.7) 3,167 (589.9) 8,100 nm -61%
EPS (TWD) (1.2) 0.7 (0.1) 2.1 nm -68%
GPM (%) -4% 11% 6% 18%
OPM (%) -8% 8% 2% 16%
NPM (%) -12% 5% -1% 11%
Utilization 70% 70% 77% 77%
rate (%)
Bit growth (%) 27% 102% 67% 68%
ASP growth
(%)
4% -31% -5% -28%
Source: HSBC
For 2010, we forecast Inotera to remain at a loss
of TWD5.5bn, but swing to net profit of
TWD3.2bn next year. In 2011, we expect Inotera
to achieve bit growth of 102%, on bit growth that
has been delayed from 3Q-4Q as a result
migration. We also forecast its margin to improve
to 8% next year from -8% this year.
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