Calls of Note Part 3

Citigroup out with interesting call on Hynix, saying that even "M9" fab has begun to switch back to DRAM - Following several order cancellations amid increasing NAND capacity, firm's channel checks suggest that Hynix has begun to convert NAND wafers into DRAMs even in its "M9" fabs in addition to "M7" fab. Firm estimates the initial size of switch back to DRAM in M9 at 10~15k WPM (about 10% of M9's total capacity).

Accordingly, they forecast that start up of switch back in M9 will likely lead to about a 10% QoQ fall in NAND wafer output to 255k wpm (vs. initial forecast of 270k wpm). Firm expect s such a switch back to DRAM in Hynix?s M9 to lead to about 25~30% QoQ DRAM bit growth at Hynix and cause: 1) greater oversupply to 5~6% (vs. Citi's 4% in 1Q07E); and 2) a steeper ASP fall to as much as 30% HoH in 1H07E.

Notablecalls: This should provide a relief to NAND names (i.e. SNDK) and put additional pressure on DRAM names (i.e. MU, QI; though MU to the lesser extent given its ~15% NAND exposure) due to shift in oversupply from NAND to DRAM.