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Intel results positive for SPE and
servers, negative for Consumer PC
Event
Intel reported 1Q sales of US$12.8bn (+25% YoY/+12% QoQ), 61.4% GPM
and US$0.56 EPS, ahead of Macq’s Shawn Webster and street estimates.
Inventory days fell to 75 days (83 days in 4Q10), below normal level of 77
days and 2Q guidance is for flattish revenues and margin, which is slightly
better than expectations. Capex was increased by +13% to US$10.2bn (+/-
US$0.4bn). The key implication to Asia tech is positive for semi equipment
and servers, while consumer PC continues to be weak and disappoint.
Impact
Semi equipment - positive: Intel’s capex boost (+13%) to US$10.2bn (+/-
US$0.4bn) from US$9.0bn prior is positive for SPE names in our view. The
capex is intended for additional 22nm capacity plus expanded spending for
future 14nm-capable fab, and represents Intel's effort to extend its technology
lead over other industry players. We view this as a positive surprise for SPE
names like Tokyo Electron. Intel’s capex/sales will now likely track towards
~19% in CY11 (21% in 1Q11, 15% in 2010).
Server market – positive. Intel highlighted strong demand in enterprise and
server markets (Data Center Group sales +32% YoY vs +17% for PC Client
Group) due to cloud build out. This is positive for Samsung/Hynix in our view
as the two companies control >75% of global server DRAM market. Server
DRAM requires low voltage (low power consumption) and thus enjoys high
OPM of ~30% and accounts for 20% of DRAM sales at SEC/Hynix. Delta
Electronics also owns ~50% global share in server power supply and benefits.
PC – negative. Intel's strength is mainly due to better servers and corporate
PC, while consumer PC remains very weak. We agree with Intel that the rapid
PC growth from emerging markets has somewhat offset slowing growth in
developed markets, but we think Intel’s outlook for low teen % YoY PC growth
is still too optimistic. We prefer tier-two PC brands over tier-one as tier-one
guys like HP and Acer will suffer more from PC maturity in Western countries
and high exposure in consumer PC, while runner-ups like Asustek, Lenovo
and Samsung may have good opportunity to gain market shares from tier one
vendors and grow from a low base. In ODM, we like Wistron for high exposure
to commercial NB (30-35% of total) and rapidly growing server segment.
Semiconductors - positive: Intel's results cast a positive light on semi
demand following the uncertainties thrown up by Japan's earthquake. While
risks persist in our view, Intel assured that that it did not see "unusual change
of fluctuations to our backlog after the earthquake" and does not expect "any
major disruptions to (its) supply lines moving forward”. Intel notes that in
1Q11, customers replenished about half of the inventory depleted in 4Q10,
mainly with Sandy Bridge products. These are positive indications and the last
comment may help assuage concerns of channel inventory issues in 2Q11.
Flip chip substrate - Neutral. The shipment of substrates to Intel from
Japanese makers in 4Q FY3/11 is likely flattish QoQ. The transition into x68-
extension is still on-going but likely to have reached 70% in 4Q FY3/11, and
we expect ASP (US dollar terms) to start declining slightly QoQ in 1Q FY3/12.
Given Nanya PCB's gradual market share gains in the flip chip sector, we
maintain a Neutral rating on Ibiden and Shinko in Japan.
India Equity Research Reports, IPO and Stock News
Visit http://indiaer.blogspot.com/ for complete details �� ��
Intel results positive for SPE and
servers, negative for Consumer PC
Event
Intel reported 1Q sales of US$12.8bn (+25% YoY/+12% QoQ), 61.4% GPM
and US$0.56 EPS, ahead of Macq’s Shawn Webster and street estimates.
Inventory days fell to 75 days (83 days in 4Q10), below normal level of 77
days and 2Q guidance is for flattish revenues and margin, which is slightly
better than expectations. Capex was increased by +13% to US$10.2bn (+/-
US$0.4bn). The key implication to Asia tech is positive for semi equipment
and servers, while consumer PC continues to be weak and disappoint.
Impact
Semi equipment - positive: Intel’s capex boost (+13%) to US$10.2bn (+/-
US$0.4bn) from US$9.0bn prior is positive for SPE names in our view. The
capex is intended for additional 22nm capacity plus expanded spending for
future 14nm-capable fab, and represents Intel's effort to extend its technology
lead over other industry players. We view this as a positive surprise for SPE
names like Tokyo Electron. Intel’s capex/sales will now likely track towards
~19% in CY11 (21% in 1Q11, 15% in 2010).
Server market – positive. Intel highlighted strong demand in enterprise and
server markets (Data Center Group sales +32% YoY vs +17% for PC Client
Group) due to cloud build out. This is positive for Samsung/Hynix in our view
as the two companies control >75% of global server DRAM market. Server
DRAM requires low voltage (low power consumption) and thus enjoys high
OPM of ~30% and accounts for 20% of DRAM sales at SEC/Hynix. Delta
Electronics also owns ~50% global share in server power supply and benefits.
PC – negative. Intel's strength is mainly due to better servers and corporate
PC, while consumer PC remains very weak. We agree with Intel that the rapid
PC growth from emerging markets has somewhat offset slowing growth in
developed markets, but we think Intel’s outlook for low teen % YoY PC growth
is still too optimistic. We prefer tier-two PC brands over tier-one as tier-one
guys like HP and Acer will suffer more from PC maturity in Western countries
and high exposure in consumer PC, while runner-ups like Asustek, Lenovo
and Samsung may have good opportunity to gain market shares from tier one
vendors and grow from a low base. In ODM, we like Wistron for high exposure
to commercial NB (30-35% of total) and rapidly growing server segment.
Semiconductors - positive: Intel's results cast a positive light on semi
demand following the uncertainties thrown up by Japan's earthquake. While
risks persist in our view, Intel assured that that it did not see "unusual change
of fluctuations to our backlog after the earthquake" and does not expect "any
major disruptions to (its) supply lines moving forward”. Intel notes that in
1Q11, customers replenished about half of the inventory depleted in 4Q10,
mainly with Sandy Bridge products. These are positive indications and the last
comment may help assuage concerns of channel inventory issues in 2Q11.
Flip chip substrate - Neutral. The shipment of substrates to Intel from
Japanese makers in 4Q FY3/11 is likely flattish QoQ. The transition into x68-
extension is still on-going but likely to have reached 70% in 4Q FY3/11, and
we expect ASP (US dollar terms) to start declining slightly QoQ in 1Q FY3/12.
Given Nanya PCB's gradual market share gains in the flip chip sector, we
maintain a Neutral rating on Ibiden and Shinko in Japan.
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