Thursday, October 31, 2019

Memory Market Results for Oct 31 (Trick or Treat) and What’s Normal

Memory Market Results for Oct 31 (Trick or Treat) and What’s Normal
We have the results in from a variety of manufacturers and can state what is going on in the market. We have all the details on individual companies and why they are behaving like they are

DRAM: All companies reported higher bit sales and much lower ASPs. Average ASP dropped mid teens  (remember when people thought prices would go up in Q3?). inventory is still pretty high

Reason: manufacturers are trying to get rid of bits, customers are taking advantage of low prices to build inventory. Datacenter/enterprise is back to growth and mobile looked pretty good. Prices dropped much more than costs so margins continue to shrink.

So DRAM is heading to 20% annual bit growth like predicted by everyone. But price drops will mean margins are continuing to drop. But at least DRAM is still making money despite lower margins.

NAND: Micron and Samsung reported higher bit sales on continued price drops. NAND is not a profitable business so prices must rise or flatten to actually make money. WDC reported flat pricing (they were claiming 10% higher prices in July) and Hynix reported mid single digit price increase on modest bits sales. And Inventory is still pretty high

Reason: Companies are behaving differently with respect to how they manage this and how aggressive to be given continued high inventory. You need to lower prices to move inventory. But you need to raise prices to be profitable. You need to move to 96L/12x layer to lower costs. But this increases capex and increase supply. This paradox will all sort out by 2H 2020… but it will be a competition until them.

NAND is a battle between working off inventory and trying to get profitable. Hynix and Samsung are behaving very differently on this. As are Micron and WDC. NAND will hit 40% bit growth as predicted by everyone but the margins are poor.

So what does balanced and normal look like? (Normal will happen in mid to late 2020)

DRAM price drops by 5% per quarter. Bits shipped increase by 5% per quarter. Costs drop by 5% per quarter. Inventory is flat (target is 4-6 weeks at supplier)
NAND price drops by 7% per quarter. Bits shipped increase by 8-10% per quarter. Costs drop by 7% per quarter. Inventory is flat (target is 6-8 weeks at supplier)

PREDICTION: We have data on who will win in this and who has challenges… And what recent Earnings reports mean…. And when inventory will be worked off…. And when Chinese companies will make a difference.  AND We have costs for everyone, so that will help determine winner.

Mark Webb

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