Thursday, November 30, 2017

What is going on with NAND Prices??

NAND Pricing is hard to monitor and difficult to predict.... and is a huge factor in memory company profits. Morgan Stanley presented comments saying price drops will be significant. Stocks reacted. So whats the deal?

What we know: NAND pricing had been increasing since July 2016. Not nearly as much as DRAM Exchange shows but it was increasing. This impacts SSDs, cellphones, memory cards etc.

In Aug 2017, at FMS, I predicted that NAND supply demand will be more in balance in Q1 2018. This is due to 3D NAND transition to 64L and added fab capacity for 3D NAND for all players. Micron, Dramexchange, and others followed my forecast on with similar forecasts for the same reasons.

If supply and demand is in balance, we can expect historical price and cost reductions of 20-25% per year. This would keep gross margin percentage approximately flat... which, considering they are at record levels, is not bad.

In the past month, data from the tracking reports is that NAND pricing is flat to down 1-2%. Micron has stopped reporting pricing but we can extrapolate and combine with MKW Ventures cost models to show price and margin impacts.

So, it does look like NAND pricing is following the prediction we made. I have no idea what impact to stock price will be. But we do track cost, margins, prices and compare all the suppliers head to head ... with that you can determine the stock price!

Mark Webb