Semiconductor Stocks Rocked By Supply Chain Issues

Supply chain issues shook a number of semiconductor stocks on Thursday. Micron Technology (MU) got a boost after a rival reported a production problem that will lower the near-term supply of Nand flash memory chips. And Advanced Energy Industries (AEIS) and Impinj (PI) flagged chip shortages in their fourth-quarter earnings reports.

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Western Digital (WDC) announced late Wednesday that chemical contamination of a material used in its manufacturing processes has occurred and is impacting production at two Nand flash memory fabrication plants in Japan. It runs those plants in a joint venture with Kioxia.

The company’s production issue could lower the industry’s Nand chip output by about 10% in the first quarter, Wedbush Securities analyst Matt Bryson said in a note to clients.

“This news is an unabated positive for other flash producers,” Bryson said. Those producers include Micron, Hynix and Samsung.

The production problem at the Kioxia-Western Digital joint venture will drive Nand chip prices higher, Rosenblatt Securities analyst Kevin Cassidy said in his note to clients.

“We see Micron benefiting from the ASP (average selling price) lift,” Kassidy said.

On the stock market today, Micron stock jumped 3.3% to close at 91.02.

Semiconductor Stocks Post Fourth-Quarter Results

Elsewhere among semiconductor stocks, two chipmakers and one chip gear vendor reported fourth-quarter results late Wednesday.

Seattle-based Impinj beat Wall Street’s targets for the December quarter but was hindered by chip shortages. Impinj makes tracking chips that use radio-frequency identification technology.

Impinj earned an adjusted 16 cents a share on sales of $52.6 million in the fourth quarter. Analyst estimates called for adjusted earnings of 3 cents a share on sales of $51.1 million, according to FactSet. In the year-earlier period, Impinj lost 15 cents a share on sales of $36.4 million.

For the current quarter, Impinj expects to lose an adjusted 2 cents a share on sales of $51 million. That’s based on the midpoint of its guidance. Analysts had predicted an adjusted loss of 3 cents a share on sales of $50.3 million in the first quarter.

“In a nutshell, Impinj’s business continues to be constrained by supply, as demand remains very strong,” Piper Sandler analyst Harsh Kumar said in a note. Demand for its chips is 50% higher than its quarterly shipments, he said. Impinj entered 2022 with a record backlog.

“Unfortunately, management does not expect any supply relief in the March quarter and only modest hope for upside in the June quarter,” Kumar said.

Impinj stock plummeted 21% to close at 70.94 on Thursday.

Diodes Delivers Beat-And-Raise Report

Plano, Texas-based Diodes late Wednesday posted a beat-and-raise report. But Diodes stock slipped 3.9% to 93 on Thursday.

Diodes earned an adjusted $1.60 a share on sales of $480.2 million in the fourth quarter. Analysts were looking for earnings of $1.45 a share on sales of $477 million. On a year-over-year basis, Diodes earnings surged 116% while sales popped 37%.

The chipmaker forecast better-than-seasonal sales in the first quarter of $480 million, up 16% from the same quarter last year. Analysts had estimated $463 million in sales in the March quarter.

Diodes makes discrete, logic, analog, and mixed-signal chips for the consumer electronics, computing, communications, industrial, and automotive markets.

Diodes stock is tied for first place with three other companies among 40 semiconductor stocks in IBD’s chip manufacturing industry group, according to IBD Stock Checkup. It has an IBD Composite Rating of 97 out of 99.

Advanced Energy Rises After Earnings Report

Denver-based Advanced Energy earned an adjusted $1.36 a share on sales of $397 million in the fourth quarter. Analysts were looking for earnings of 94 cents a share on sales of $357 million. On a year-over-year basis, earnings declined 9% while sales rose 7%.

For the first quarter, Advanced Energy forecast adjusted earnings of 94 cents a share on sales of $360 million. However, Wall Street’s consensus estimates were $1.01 in earnings per share and $361 million in sales.

“We delivered strong revenue and earnings in the fourth quarter, largely due to improved availability of critical ICs (integrated circuits),” Chief Executive Steve Kelley said in a news release. “We enter 2022 with robust demand for our industry-leading power solutions. Although our business continues to be impacted by supply constraints, our fourth-quarter results demonstrate that we can respond quickly as conditions improve.”

Advanced Energy stock dipped a fraction to close at 85.59 on Thursday.

Advanced Energy makes power conversion, measurement, and control systems for semiconductor equipment, industrial, manufacturing, telecommunications, data center computing and health-care applications.

The Philadelphia semiconductor index, known as SOX, is down about 10% so far in 2022. The index includes 30 semiconductor stocks. On Thursday, the SOX fell 3.2%.

Follow Patrick Seitz on Twitter at @IBD_PSeitz for more stories on consumer technology, software and semiconductor stocks.

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