Hopefully, this is the bottom of the market, but only time will tell

Memory producers had predictably bad 1Q08 financial results, with DRAM prices low and lower and NAND prices dropping 30-50% from 4Q07 to 1Q08, depending on who is doing the talking. All in all, revenues for memory makers tracked in our worksheet dropped 13% from 4Q07 and profits (or losses, as the case may be) continued their slide, and exceeded about $4B. A few smaller companies and those outside DRAMs managed to keep their heads above water. Sales and profits are shown in Table 1 below (all values are millions of dollars):

[More:]

"Others" include Sony, Matsushita, Renesas, Toshiba, Fujitsu, NEC, Elite Semi., G-Link, Alliance Semi., Sharp
'Profits' are divisional operating profits for Samsung, STMicro, Intel; profits are after-tax profits for remainder of companies
Mosys, Sandisk, SST, Saifun and Rambus include substantial IP licensing revenues as % of sales;
Exchange Rates 1Q08: 105.8Yen/$; 962 Won/$, 0.659 Euro/$; 31.4NT$/US$

A few additional comments are in order:

Numonyx Launch: At the end of the quarter, Numonyx was launched out of ST's NOR and NAND businesses, combined with Intel's NOR business. Intel will continue to build some NOR for Numonyx on a contract basis for a while, Numonyx will continue to supply Intel-branded NOR product to Intel, for service continuity to Intel customers under existing Intel contracts. All of Intel's NAND business is a part of IMFT, their JV with Micron, and they take half the output for IMFT's several fabs. So, Intel is out of the Flash (manufacturing) business, but still sells NOR and NAND, at least for a while.

Intel's Flash Operating Profits: Estimating the operating loss from Intel's flash business was complicated by several issues, which were not entirely made clear in their 1Q08 call to analysts. They DID take a $275M Asset Impairment charge against their assets transferred to Numonyx; they DID note sales for all flash of $497M, and alluded to an estimate of $300M in 1Q08 for the NOR portion only (the remainder was assumed to be NAND, received from IMFT). We estimated an operating loss of $500M, including the one-time asset impairment. This does not get any easier, even with shedding NOR to Numonyx with the aforementioned continuing buy/make/sell arrangement noted above. Intel also will own a share of Numonyx profits and loss?

Stock Option Transparency, and Adjustments: All companies now seem to have their stock option backdating issues behind them, are in compliance with current laws on Stock Option pricing, and have, where necessary, restated their earnings. Whew, glad that one is done.

Cypress is now "Cypress Semiconductor" only: Cypress Semiconductor is shown separately now, as their solar panel unit, Sunpower, operates and reports as a separate entity.

Deleted m- systems and Saifun from roster: m-systems and Saifun have now been dropped from the worksheet listings, since they have been acquired by SanDisk and Spansion, resp., more than a year ago.

JVs Boil up to Improve Industry Efficiencies, Stay Alive: Joint ventures, discussion and business combinations expanded considerably during 1Q08, in response to weak DRAM pricing. Micron is now partnering with Nanya, displacing Qimonda. The fate of Qimonda and Nanya's Inotera DRAM fab is still undecided. Qimonda is now talking to Elpida about coordinating R&D efforts. Elpida has Powerchip as a foundry and Rexchip as a major 300mm 70K/mo JV (with Powerchip) for DRAMs. SanDisk's JV NAND fabs with Toshiba are stable, but they also announced an extension of their agreement for additional NAND flash manufacturing partnering.

Samsung's Unusual Loss led by DRAMs; Taiwan Pure Play DRAM Makers Lose about 76 cents for every Dollar of Sales: By our best estimates, Samsung memory products lost money for the first time since early 2001, largely due to DRAM price erosion. As a whole, Taiwan's DRAM makers (Nanya, Inotera, ProMOS, Powerchip) lost an estimated $979M on DRAM sales of $1291M. In general, we believe that NAND makers results ranged from being slightly profitable to losses of 25-35 cents per dollar of sales. DRAM makers showed losses ranging from 30 cents per dollar of sales down to "1:1."

Commodities? Playing in the Same Markets? There was a wide variation among companies in what they reported as year/year and sequential price declines for both DRAMs and NAND flash in their conference calls. In addition, what they saw as sequential MB shipment growth for both NAND and DRAM were quite variable, and not easy to understand. Although there are good reasons for some variations from vendor to vendor, the Hi-Lo range was often close to 2x.

Macronix and Mask ROMs Lead the Market: Among all memory makers, Mask ROM maker Macronix starred by having profits of $25M on sales of $161M...and was the memory industry's best financial performer.

Weakening US Dollar's Impacted Results Considerably: The decline in the value of the dollar against (most) major currencies during 1Q08 influenced sales levels and earnings dramatically, as the dollar fell 6-10%. The chart below shows quarter-ending 12/31/07 and 3/31/08 exchange rates for the Euro, Won, Yen and NT$ (not the quarterly averages):

Source:  www.x-rates.com