Semiconductor shares rise as Micron predicts memory recovery

(Reuters) - Shares of semiconductor companies worldwide rose on Thursday, after U.S. chipmaker Micron Technology Inc predicted a recovery in a memory market saddled with oversupply as demand for mobile phones slows.

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Stocks in chipmakers have been pummelled in the last six months as demand for Apple’s iPhones declined and prices for DRAM and NAND memory chips sank due to an oversupply, adding to concerns that a two-year-long semiconductor upswing was coming to a halt.

Micron’s remarks came as it reported quarterly earnings above analysts’ estimates on Wednesday as cost-cutting helped offset falling demand and prices.

A chip recovery will likely be fueled by fresh investments from data center customers and more memory content in phones, according to JPMorgan analysts.

Micron’s shares rose 8.7 percent on Thursday morning. Shares in Advanced Micro Devices Inc and Nvidia Corp rose 2 percent, while Qualcomm Inc and Intel Corp climbed 1 percent.

SK Hynix, the world’s second-biggest memory chip maker, saw its shares surge nearly 7 percent by 0330 GMT, while Samsung Electronics Co Ltd gained 4.3 percent.

Both Samsung and SK Hynix said in January that they expected sales of memory products to revive in the second half of the year.

Summit Insights Group analyst Kinngai Chan upgraded Micron’s stock to a “buy” rating and predicted that the chipmaker’s cost cuts would outpace price declines in the second half of 2019.

Shares of European chipmaker Infineon Technologies AG rose 1 percent, while STMicroelectronics NV added 1.6 percent.

Analysts have been wary about prospects for the memory chip market due to lower demand for smartphones and slumping investment from data center companies.

“We see 2019 as an industry cycle bottom and what makes this interesting is that Micron will emerge from it without negative earnings,” Rosenblatt Securities analyst Hans Mosesmann said, adding Micron could focus on returning at least half of its free cash flow to shareholders.

Tech research firm TrendForce in a report on Wednesday said it expects a only a slight decline in NAND flash chip sales in the second quarter as demand recovers from smartphones, computers and servers.

“Although it won’t cause an immediate reversal of the oversupply situation, it will have a positive effect on the market environment,” analyst Ben Yeh at DRAMeXchange, a Trendforce division, said in the report.

U.S. chip equipment makers, which supply tools for chip making and designing, also edged higher on Thursday. Lam Research Corp rose 2.5 percent and Applied Materials Inc jumped about 3 percent.

Reporting by Sonam Rai in Bengaluru and Heekyong Yang in Seoul; Editing by Christopher Cushing and Sai Sachin Ravikumar