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Semiconductor Memory Industry: Key Insights

Mar. 05, 2018 10:39 AM ETINTC, MU, WDC7 Comments
Bader Al Hussain profile picture
Bader Al Hussain


  • Structure of memory industry has changed.
  • China is the big unknown to the future of the industry.
  • The supply would slow owing to technological constraints.

In this article, I would try to develop key insights pertaining to the memory and storage industry of the world. Along with a focus towards the future emerging trends.

According to the MicKinsey, during 1996 and 2012, the memory players were unable to create economic value, despite contributing significantly to the overall semiconductor industry through technological innovations. This was due to following reasons:

  • Intense competition among the rivals.
  • Commoditization of DRAM and NAND flash.

However, recent structural changes such as:

i) High barriers to entry,

ii) Consolidation in DRAM segment owing to a diversified demand for products, iii) lower capacity increments, and

iv) Slowdown in Moore’s law have swelled the margins of the sector. It should be noted that the capacity of memory bit is determined by the capacity of memory wafer and the number of bits per wafer.

Although the capacity of memory wafer has increased by ~86 percent in the last seven years, I anticipate slower technological progress in process node shrinkage due to the factors mentioned below. Notwithstanding Moore’s law, the International Technology Roadmap for Semiconductors has also stated that the process miniaturization has slowed.

Presently, the industry expects its future growth to come from IoT (Internet of Things). Although its inflection point has not happened, the main challenge to the industry originates from the complexity of products and processes. This limits the industry's ability to respond to the current pace of innovation.

Demand Drivers

Demand for memory and storage products would come from the following factors.

  • Increasing graphics memory in games and the prominence of gaming as a mass sport, particularly in emerging countries. Such trends would inevitably create a demand for a higher bandwidth and density.
  • Average memory content in server units is raising the demand for server DRAM and NAND flash. Google,

This article was written by

Bader Al Hussain profile picture
My interest is to value stocks (especially Tech companies) based on different narratives.

Analyst’s Disclosure: I/we have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.

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Comments (7)

BigMichael profile picture
Also as stated in the opening comments is that memory production has a high barrier to entry. I am cautious about China’s entry into this market on one hand and on the other, without the required IP, China’s entry into this market prior to 2025 is suspect.

From an investment perspective, companies like Micron will enjoy multiple expansion as their financials become more predictable.
It is 1:00 p.m. this afternoon and MU has traded 40 million shares already, and the stock is UP $3 to around $52.

I am just glad these folks buying all of these shares today, and setting a new 52 week high, did not read this article. It might make them change their minds? :)

March 22nd coming up (Earnings Report) and I am holding all of mine and just bought more shares last Thursday on what I will call “TRUMP TARIFF THURSDAY”. I also BOUGHT MO, LB DIS, KHC as well as adding to my MU. When TRUMP got elected, he made me a bunch of money, because everyone thought Clinton was a shoe in. The Market went crazy and UP! Last Thursday TRUMP talks TARRIFFs (Right after FED Speaker Powell scares Markets on Tues., Wed., and Thurs. morning) and I jumped in and went 100% into the stocks mentioned above.

I sure am glad this article did not come out last Thursday or Friday. It might have scared me out of buying all of the stocks I did! :) And just think about All of the Money I would have missed out on. I get goose bumps (cold chills) just thinking about it!

Wishing Well To MU Shareholders!
Does anyone have an eye on any particularly interesting semiconductor companies likely to stand out in China today?
This article is all about quantity over quality however quantity never wins quality for a long term solution
I don't have any problem with the methodology of this article...its a very consulting type approach utilizing Michael Porter's Five Forces framework as applied to the industry. The only real disappointment are the final conclusions reached are pretty much we all know already.
heading to 75 mark

quality always wins over quantity
oldbeachlvr profile picture
Very superficial article. And to suggest that China will purchase Toshiba Semi is totally fantastic with no basis in fact. This author needs to read some of the very excellent Semi memory/storage authors here on SA.
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