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September 6, 2018 | Tech Inventories Hit Pre-Crisis Levels as Demand Weakens: Chip Stocks Hammered

Mike 'Mish' Shedlock

Mike Shedlock / Mish is a registered investment advisor representative for SitkaPacific Capital Management. Sitka Pacific is an asset management firm whose goal is strong performance and low volatility, regardless of market direction.
Tech inventories have piled up at Apple, Intel, HPQ, etc. Today, chips stocks are hammered over inventory concerns.

“Memory markets have worsened in recent weeks. For DRAM [memory chip], demand is weakening, inventory and pricing pressures are building, and vendors are struggling to move bits,” Morgan Stanley analyst Shawn Kim said in a note to clients Thursday. “In NAND [flash memory], there is just too much supply. Earnings risks are emerging from 3Q and our cautious view on memory is playing out.”

“All your three big drivers [PC, mobile, data center] for demand has worsened actually quite substantially in the last two weeks and will drive lower pricing into the third quarter. … Because of this lower demand, inventories are actually piling up [at Samsung and Hynix],” Kim said on a Morgan Stanley “Sound Bites” audio call Wednesday.

Micron Weekly

Micron is down 9% for the day and 14% for the week, but it has had an amazing rally from under $10 to over $60 in two years.

Beautiful Bubble Symmetry

One has to appreciate the beautiful bubble symmetry. On the monthly chart, support is at $10.

Rising Tech Inventories

Storm clouds are brewing over the global technology industry.

A host of hardware companies, including Apple Inc., Samsung Electronics Co., Foxconn Technology Group and Intel Corp., are sitting on inventory stockpiles not seen since the financial crisis a decade ago.

Stockpiles escalated rapidly over the past year, with inventories surging at Apple and its chief supplier, Foxconn. Intel’s numbers are also high, while weaker revenue at Samsung is exacerbating the problem there.

Samsung is the most complicated to analyze because the company has its fingers in so much of the supply chain: It manufactures the components, assembles devices and sells under its own brand. That makes it difficult to pinpoint precisely which part of the firm’s inventories are most problematic. Yet that also means Terry Gou’s flagship is among the best examples of the industry’s end-to-end challenges.

Lather, Rinse, Repeat

We have some serious flushing to do.

Mike “Mish” Shedlock

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September 6th, 2018

Posted In: Mish Talk

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