Friday, March 8, 2019

5 Things to Know About the Current Memory Market

5 Things to Know About the Current DRAM and NAND Market

Everyone is concerned about the memory market and trying to predict the future. Five Items to consider

1) Memory market is still growing long term. But the numbers matter. DRAM bits are growing at 18-20% CAGR. NAND bits are growing 35% CAGR. That is about the lowest CAGR in history, is indicative of a maturing market and includes effects of of all the buzzwords (SSD, NVMe, AI, ADAS, 5G, Edge Computing). What does this mean? On DRAM, we can’t always grow our way out of supply issues (without crashing the price) and if prices drop at all, it takes a long time for revenue to recover. On NAND, we can grow our way out but it requires massive price drops.

2) As mentioned in a previous note, elasticity helps growth but it is not as large as expected, not as quick as hoped, and whenever we are talking about significant elasticity, profits are at risk.

3) A famous man said recently “There is No Collusion!!”. IF the DRAM suppliers work together to never lower price and hold inventory until Apple, Dell, Google cave on pricing, then DRAM profits will continue at unreal levels. But even getting 3 people to collude appears to be tough… this is evident in DRAM pricing. The "MKW" report says “currently little evidence of collusion”. 

4) NAND is in a time where profitability is not a given. At this time, one of the keys is “who has lowest cost (full and cash), who can best survive a zero profit market?” Historically we would often say Samsung is the low cost producer. But differences in technology and the movement from 32L-128L has changed the leaders along the way. Also, target markets from phones, to Client SSDs, to Enterprise SSDs will change this.

5) When does this bottom out? Micron will probably give us the next checkpoint on Mar 20th. But we need to un-hide the demand by fixing inventory. If Amazon knows Hynix is holding 12 weeks of inventory, they will reduce theirs to “working inventory” and demand lower prices. Starting less wafers is not a smart idea so companies build more inventory. Once corrected, long term demand, short term demand from the field, plans for supply growth and revised cost numbers all kick in to tell us whether it is a 1 quarter dip or a 6 quarter dip. We have the numbers from all of these areas and an estimate on when it will recover that is updated weekly.

Mark Webb

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