Investors should buy stocks of memory chipmakers amid prospects of a rebound next year and sell shares of liquid-crystal-display (LCD) makers on expectations of a glut, Lehman Brothers Holdings Inc said yesterday.
“We believe investors should switch their focus from LCD names to memory names, as the two industries are headed in opposite directions,” Lehman’s Seoul-based analyst James Kim wrote in a report to clients. “LCD momentum likely peaked in the first quarter, while shipment value growth for the memory industry bottomed out in the first quarter.”
Rebound
Prices of the chips known as dynamic random access memory, or DRAM, have rebounded in the past two months after a glut drove major producers, including Samsung Electronics Co, to post losses for the product in the first quarter of this year.
“We expect a severe downturn to start in the fourth quarter for LCD versus a stronger rebound in first quarter [of] 2009 for memory,” Kim said, adding that Hynix Semiconductor Inc, the world’s second-biggest DRAM maker, is his top pick for memory stocks.
The price of the benchmark DRAM chip has gained 12 percent this quarter after remaining at near record lows since sliding 85 percent last year, said Dramexchange.com, Asia’s biggest spot market for semiconductors.
Price fall
Flat-panel manufacturers, including LG Display Co, the world’s second-biggest LCD maker, AU Optronics Corp (友達光電) and Chi Mei Optoelectronics Corp (奇美電子), are less attractive relative to memory stocks, the report said.
“LCD prices will fall rapidly from October 2008 through the first half of next year due to oversupply,” Kim said.
He forecast a 64 percent increase in capital spending among LCD companies this year, compared with a 33 percent boost for memory chipmakers.
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