Thursday, April 2, 2020
A few weeks ago, I went to a Target shopping for basics. I don't shop at Costco and buy a month ahead of time, I get a few times a week and just buy what I am about to run out of (I am a big fan of vendor managed inventory). I went to the paper towel and toilet paper aisle and it was empty. I had no idea why. I called a friend and said "is Target going out of business? whats up?" I was informed that there was a run on products due to COVID-19. Luckily for me, the grocery store down the road had tons of paper products, so a picked up some. A few days later obviously things got a lot worse. My reaction was "go to store, get a ton of everything, this is a survival competition.... whoever gets the most stuff wins " ... I am an engineer ... but I am still human. Note: I have literally seen the supply chain manager for a hyperscale company do the exact same thing.
In the 2-3 weeks since, supply and demand forces kicked in and.... from this... we can learn a lot about commodity markets like NAND and DRAM (Yes, kids, memories are a commodity).
Bottled water was a quick one to go from all the stores. "what? there is no water? then I need more!" I was at a Dollar Tree where a customer came it and said "I want to buy all the bottled water in the store" ... the manager spent the next 30 minutes loading it into a truck. We had a shortage for about 2 weeks and then... funny thing happened. My grocery store stacked water to the roof on 3 aisles. No more shortage. No more people buying pallets of water.
SUMMARY: Real demand didn't increase. People are not drinking more water. The fear increased so people want more and bought tons to add to their inventory. The greater the shortage, the more they want. Once the supply increased, the fear was gone, people say "OK I will just buy water when needed."
Toilet paper is running short and last time I was at stores, the shelves were still empty. It is being rationed and people are ordering on Amazon with a deliver time of late May. Unlike water, stores have not been able to increase supply fast enough so the panic continues.
SUMMARY: Real demand didn't increase. People are not using more TP. The fear increased so people want more and bought tons to add to their inventory. The supply did not not increase, the fear is still there. When this is over, what do you think will happen to TP sales?
Hand Sanitizer is running short and last time I was at stores, the shelves were still empty. People are ordering on Amazon with a deliver time of June. People want more and unlike water, stores have not been able to increase supply fast enough so the panic continues
SUMMARY: Real demand DID increase. People are using more Sanitizer .The fear increased so people bought tons to add to their inventory AND to use. The supply did not not increase fast enough, the fear is still there. When supply is there, people will probably use more hand sanitizer for a year or more.... maybe forever.
These give examples of what happens with memory. Because price gouging is illegal in groceries (but not memories???) price didn't affect most groceries. When there is a shortage, everyone wants more to store for inventory. Sometimes supply can adapt, sometimes it cannot. Sometimes real demand increases.... often it does not. Lots of discussion on what is happening today and next year in DRAM and NAND to follow up on this.
Next we can discuss supply dynamics of Masks, ventilators, gloves and whether they should or should not (considering microeconomics input only) build more factories. Spoiler alert: It is like NAND, NOR and DRAM capacity planning.
Thursday, February 6, 2020
We had earnings announcements from Seagate, WDC, Hynix, Samsung, WDC, STX, Intel, AMD and others. Lots of new data and predictions for you. 2020 is not going to be dull.
- Everyone says memory cycle downturn has ended. But how fast will we recover and how good will it get? Will DRAM prices skyrocket? Should we party like its 2018?
- Supplier inventories are “near” target (except for Micron who is stockpiling for NAND overhaul). Now FINALLY we have a fair starting point for pricing discussions and supply agreements. And customers need to plan their inventory level targets.
- Speaking of customers…. Datacenter Giants (not to be confused with the Datacenter Dinosaurs who also exist) will buy and build big…. Then take a hiatus and digest the infrastructure build much to the dismay of CPU and memory companies… then build again.
- Everyone’s 2020 bit demand growth is approximately aligned (within 5%) but is the number good or bad for EPS growth?
- WDC and STX are making more money on HDD and the technology is marching on. At this rate, HDD bit ASP will be ZERO by 2025 (just kidding, I should have used a log graph). But we ARE poised to have the SSD to HDD bit price ratio INCREASE just like in 2017.
- Optane DC persistent memory (DIMMS, 3D XPoint) IS cheaper than DRAM and has great performance…. but is still growing slower than expected despite Intel success in Cascade Lake ramp. When will this change? When will CXL help here?
- New DRAM and NAND memory technologies are coming out and how they achieve cost reductions is different for each company. The NAND cost leader will change in 2020
- China Virus and trade issues will either hurt or help memory manufacturers depending on who you ask. We predict the average of those two scenarios!
Monday, January 20, 2020
With Persistent Memory Summit coming up this week, I am posting Five items for people to look for in evaluating persistent memory solutions and trends. I will be at the Summit so please feel free to argue with me in person!
- A couple years back at the PM summit, Jim Pappas was adamant on stating that persistent memory is here today, right now, and is not a mythical future item (which it really had been for many years). I love that focus. There is enough real stuff to look at without getting sucked into tomorrow’s possible technology. Review where NVDIMMS, RDMA/NVMoF, Optane/3D XPoint, etc are today and how they are being implemented. We can discuss the mythical future technologies afterward over drinks!
- At Flash memory summit, we provided our definition of persistent memory which references a PM summit paper from 2 years back. The key is that it needs to be persistent, it needs to be accessed like memory and it has to have a reasonable, memory like, latency. I love fast SSDs, but fast SSDs and virtual memory mapping are not persistent memory (IMHO). Look for true PM attributes and applications.
- Intel has put a tremendous amount of work and marketing into Optane DIMMS (Apache Pass, Optane DC persistent memory). Cascade lake has many skus to take advantage of these and Intel has product availability and inventory to support it. Sales of Optane and the use of true PM (app direct mode) is a test case for future market revenue projections. Look for what Intel and their customers are saying about sales and ramp of Optane DC PM. We projected in August 2019 that Intel DC PM sales (DIMMS only) would grow from $700M in 2020 to >$2B in 2024. It FEELS like Intel is slow to meet that revenue projection… but lets see what Intel says when asked (Hint: Earnings announcement is same time)!
- Intel builds on a custom protocol and uses its memory controller to manage persistent memory. The rest of the industry has protocols planned for a more open architecture. NVDIMM-P, CCIX, GenZ, OpenCAPI, CXL are proposed to allow multiple technologies to achieve memory like access and speeds. How are those doing and who is implementing solutions today? Who will win?
- Applications! Everyone is looking for the killer app…. We know of some specific applications of persistent memory (large datasets, quick recovery from reboot, journaling info) but what are the applications that will make is so that 50% of servers MUST have persistent memory? Look for the volumes required and the timing for those.
As you would expect, we have summaries and opinions for most of these topics and more topics like cost, pricing, technology timing and scaling, revenue, etc. Please call or text to discuss.
Friday, January 10, 2020
With the bottoming of the memory market and reports of NAND price and DRAM price increases, People want to know how all these numbers pan out. No one knows for sure... But…there are some market forces and reasons why numbers vary
Updated thoughts on pricing models and how to interpret
- Memory is a commodity. Period.
- 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 reported contract price is not REAL contract price and does not match company ASPs
- Apple does not pay more in price because the exchange price increases unless they think they cannot get shipments. They prefer to get companies into a bidding war. When prices drop, large companies do expect suppliers to cut price…. With or without a pricing contract. And they usually do because it means there is excess supply
- Exchange prices and analyst reports are often for a particular part. That part may increase in price but because it did, people bought a different, cheaper part.
- Hypothetical example: Hynix 256Gbit TLC, 64L NAND price increases 5%. But the recently introduced 512Gbit TLC, 96L Gbit is 15% lower price per Gbit. And the 512Gbit 96L QLC part is 20% low price per Gbit. End result: analyst reported NAND price went up. Hynix company ASP dropped 10%. Both are true.
- Confirmation example: In 2017/18 Micron did not report any annual NAND price increase. In fact, ASP dropped 7% in F2017, 8% in F2018. Similar data for other companies… Yet most people will still tell you NAND prices went up 30-50% during that time. DRAM did Increase 50% during that time for Micron..... However all exchange prices show 100% price increase
- Actual pricing is a response to market growth, Inventory, and customer relationships. We can discuss how to track these and some basic conversion factors from exchange price to ASP.
- 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 differences in cost with different leaders than 2019.
Where are we today?:
- We had a shortage of NAND and DRAM through about Q4 2017 and Q3 2018 respectively. Since then both were in major oversupply. Inventory at customers and suppliers skyrocketed. Reports are that inventories are now nearing target. Suppliers report shortages on some line items.
- Well publicized supply limitations (power outage, Fires, Japanese chemicals, Reduced wafer starts) have people optimistic on pricing. DXI skyrocketed. All of these require discussion to see if they matter and how much.
- Dramexchange has reported spot NAND price increases since April 2019, We are just now seeing companies report modest price increase (they are ALL losing money in NAND so they need to increase price). Dramexchange has started to report spot DRAM price increases in the last 30 days.
- It is a cyclical commodity market. (did I mention this before????)
lots of positive reports on pricing these days. The key is how much will
companies see and will it last. We track all of the metrics and can discuss
how these impact different companies
MKW Ventures Consulting