Micron, Microchip Are Apples & Oranges; Summit Research Defends Semis (MU) (MCHP) (FORM) (LCRX)
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Analyst Srini Sundararajan of Summit Research recommends investors buy Micron Technology (NASDAQ: MU), ASML Holdings (NASDAQ: ASML), Applied Materials (NASDAQ: AMAT), FormFactor (NASDAQ: FORM), and Lam Research (NASDAQ: LRCX) on today's sell-off. Comments follow Microchip Technology's (Nasaq: MCHP) warning yesterday.
In Sundararajan's view, Micron and Microchip Technology are apples & oranges. In other words, Microchip's warning means nothing for these stocks and others like KLA-Tencor (NASDAQ: KLAC).
"Microchip is more relevant for its microcontrollers perhaps more relevant for automotive area and for Internet of Things (IoT) applications and not really relevant for PCs, servers, DRAM memory, NAND memory. They also have some analog and minor memory chip essentially go with their microcontrollers. A typical microcontroller could be one that is used in your microwave. MU derives its revenue from DRAM DDR3 chips, which are in shortage and fully booked up by Apple, Samsung and Chinese smartphone and tablet vendors as well as PC, server vendors. Similarly Micron’s NAND is used as storage. Similarly most of leading edge semiconductor manufacturing is going to go on as planned," said Sundararajan.
Sundararajan went on to suggest Microchip might have overestimated Supertex and ISSC sales.
"Along the same lines, MCHP bought two companies, Supertex and ISSC (Taiwan) recently and might have overestimated their sales when it gave its guidance. In addition, given that Chinese government is spending more on semiconductors, these microcontrollers should be one of the first products that they could manufacture as these products are not as technologically sophisticated to make vs. microprocessors, DRAM, NAND and other leading edge chips, which are probably orders of magnitude more difficult to make," he added.
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