Monday, August 19, 2019

Memory Pricing Update and Models August 2019



One of the most common questions these days is “what will happen on pricing”. No one knows for sure and wild reaction to news articles is adding to the speculation









Some thoughts on pricing models

  • DRAM exchange/ Inspectrum is usually directionally correct, but wrong in magnitude and in absolute numbers when comparing to actual company ASP
    • Spot pricing is open market and not related to what major customers pay
    • Customers react differently in magnitude to increases and decreases in exchange price
    • Even contract price is not REAL contract price and does not match company ASPs
  • Over time prices drop … A lot … in a balanced market, we model 25% per year for NAND and 15% per year for DRAM going forward. This is FAR lower than historical memory pricing (35%+) and matches cost expectations.
  • Actual Pricing is a response to market growth, Inventory, and customer relationships. We can discuss how to track these
  • the number one input to memory company profits is pricing.... so anything they can do (legally hopefully) to get pricing to increase will help memory companies. Unfortunately or fortunately, they are just not very good a collusion! but there are legal tactics that they do all the time.
  • Cost for each company matters. One model is that pricing always drops til at least one company loses money. Today, not all memory companies have the same cost. in 2021, there will be even larger differences in cost with different leaders
Where are we today?:

  • We had a shortage of NAND and DRAM through about Q4 2017 and Q3 2018 respectively. Since then both are in major oversupply. Inventory at customers and suppliers skyrocketed. We can explain why this happened and when it will happen again.
  •  Well publicized supply limitations (power outage, Japanese chemicals, Reduced wafer starts) have people optimistic on pricing. All of these require discussion to see if they matter and how much. Remember: lowering wafers starts is a horrible business idea.... unless you tell everyone you are doing it!
  •  Dramexchange has reported spot NAND price increases, contract price decreases, wafer price increases.  This actually all makes sense. We have input from suppliers and customers and where they see the market and strategies. It is a cyclical market, prices will go up WHEN there is a shortage. We have a model on when this will happen across the board as reported by real companies. We also tell you how to monitor it


So lots of people will report where pricing is today (Dramexchange and Inspectrum are good starts). The key is how to monitor this in the next 3 months, 6 Months, 1 year and 2 years and why each company may not see the same effects. Contact us for more information

Mark Webb
MKW Ventures Consulting







No comments:

Post a Comment