Sector Snap: Memory chip makers rise

In afternoon trading, key memory chip manufacturer SanDisk Corp. advanced $1.25, or 7.1 percent, to $18.87, while rival Micron Technology Inc. rose 17 cents, or 2.9 percent, to $5.96.

ThinkPanmure LLC analyst Vijay Rakesh noted that SanDisk's stock has suffered as prices for NAND--a key type of memory chip used in consumer electronics--have fallen amid an inventory build-up and a slowdown in consumer spending. SanDisk shares have lost nearly half their value since the start of the year.

However, Rakesh's checks indicate that flash memory producer Samsung has allocated 50 million 8 gigabyte chips to customer Apple Inc.--which is ramping up production of the next-generation iPhone--in July in August. In a note to investors, he said the move "could substantially reduce Samsung's inventory and reduce some of the price pressure on NAND and inventory overhang in the market."

He added that NAND prices have already shown the first signs of stabilzing. Spot prices have risen modestly over the past two days.

Elsewhere, Thomas Weisel Partners analyst Kevin Cassidy said that any improvement in NAND prices would likely be driven by demand, but said that seasonal trends could stabilize NAND pricing toward the end of the third quarter, possibly helping SanDisk shares.

Cassidy also said that prices for DRAM memory--another flash memory type used in computers--are likely to stabilize in the second half of the year.

"We expect the DRAM market to remain relatively stable in the following weeks," he wrote to clients. "Moreover, we believe a favorable DRAM supply/demand balance and healthy PC market will continue in a seasonally stronger secong half leading to stable average sales prices."

SanDisk and Micron bucked a broader decline among chip stocks. They were the only two companies on the 18-stock Philadelphia Semiconductor Sector Index to advance in afternoon trading.

The index fell 4.99 to 361.05. Posting the biggest declines on the index were chip equipment maker Teradyne Inc.--down 54 cents, or 4.8 percent, to $10.71--and German chip maker Infineon Technologies AG--whose U.S.-traded shares fell 32 cents, or 4.1 percent, to $7.43.