SEOUL/SINGAPORE, May 19, 2018 (News Wires) - Investors in global chipmakers have had a rocky ride in the last few months on worries about a slowing smartphone market, but a clamour for more video content from consumers is underpinning buoyant sales for memory-chip makers. Indeed, the earnings reports of various chipmakers and smartphone companies in the past month tell a more interesting story beyond the cooling in phone shipment volumes: smartphone makers are cramming their devices with memory to satisfy the increasing demands of consumers. A case in point is the recent quarterly report from Apple. The Cupertino, California-based company said the iPhone X was the most popular iPhone model in the March quarter - the first cycle ever where the costliest iPhone was also the most sought after. More upbeat assessments from Samsung Electronics, Qualcomm, and Franco-Italian company STMicroelectronics, have also eased concerns. Samsung last month forecast strong sales for "high-density" chips that have more processing power and bigger storage capacity - demand that will help it weather a decline in overall smartphone shipments as consumers are willing to pay for costlier and faster models that allow them to easily watch and store large amounts of video. "Even as the number of smartphone shipments slow down, each smartphone will contain memory chips with bigger capacity and better performance, which, for memory chipmakers, makes up for a slowdown in the number of total smartphones," said Kim Rok-ho, an analyst at Hana Financial Investment. That puts into perspective a warning by Taiwan Semiconductor Manufacturing (TSMC) of softer smartphone sales, which was partly responsible for the recent selloff in Apple and other chipmakers. The broader concerns about a slowdown in the chip market appear to have eased as well. The Philadelphia Semiconductor Index, a proxy for global chipmakers that fell sharply from its peak in mid-March on initial iPhone sales concerns, has stabilised in the past two weeks, posting a 4.4 per cent rise so far this year. The $122 billion memory chip industry enjoyed an unprecedented boom since mid-2016, expanding nearly 70 per cent in 2017 alone, thanks to robust growth of smartphones and cloud services that require more powerful chips that can store loads of data. The pace of growth is set to more than halve as memory-chip prices come off their highs, but the outlook remains strong for pure-play memory chipmakers such as Micron Technology and SK Hynix. Micron's shares have risen 18 per cent this year and Hynix's stock has gained 8.5 per cent. Revenue at Micron, for instance, has grown at an average rate of about 65 per cent in the two quarters it has reported this year, and analysts expect it to grow at an average of 30 per cent for the rest of the year, according to Thomson Reuters. Micron and Hynix both trade at roughly 4 times forward 12-month earnings against a sector median of 16.7, suggesting that the stocks have room to grow.
