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NAND And DRAM: An Upturn Is Closer Than We Think

Dec. 03, 2018 6:45 PM ETAMAT, LRCX, HXSCL, MU, SSNLF76 Comments


  • Projections of short-term oversupply of DRAM and NAND memory chips are impacting memory companies like Samsung Electronics, Micron Technology and SK Hynix.
  • The oversupply of memory chips is resulting in decreased average selling prices, but price erosion will improve in Q4 2018 for NAND and Q1 2019 for DRAM.
  • Although chip prices are dropping, bit growth of the memory chips is resulting in high revenues and margins for manufacturers.
  • Although demand for smartphones is flat, and capex spend for cloud servers is slowing, increased memory content per device is growing strongly.
  • Semiconductor equipment companies Applied Materials and Lam Research have seen stock prices plummet because of push-outs of purchases by memory companies, which will continue in 2019.

I reported in several Seeking Alpha articles that a drop in ASPs was coming for NAND and DRAM memory chips. For example, I reported In a December 13, 2017, Seeking Alpha article entitled “The Memory Sector Is Distorting Overall Semiconductor Industry Growth In 2017” that both NAND and DRAM ASP growth began dropping in Q2 2017.

I also noted in the article that these chips:

“...will drop into negative growth through 2018 for both DRAM and NAND.”

I projected in the charts that ASPs would turn to negative growth in Q1 2018 for both companies for both NAND and DRAM. In reality, NAND growth turned negative in Q4 2017 for Samsung Electronics (OTC:SSNLF) and Q1 2018 for SK Hynix (OTC:HXSCL). I’ve tabulated inflection points in Table 1.

While we won’t know Q4 2018 DRAM prices for both companies for another six weeks, confidence is high the QoQ ASP change will be negative. For example, ASPs dropped from 2.5% in Q2 2018 to 0% in Q3 for Samsung, and from 2.7% in Q2 to 1.2% in Q3 for SK Hynix.

I was off by three quarters for DRAMs because I neglected to take into consideration the fact that the DRAM industry is an oligopoly. That is, the three major DRAM companies Samsung, SK Hynix and Micron Technology (MU) could adjust supply to stall the drop in ASPs to negative growth QoQ.

In this article, I wanted to update data as well as forecast ASPs through 2019. I'm also including an analysis of NAND and DRAM from Micron Technology.

In Chart 1, I present data for Samsung, forecasting ASPs through CY 2019.

Chart 1

In Chart 2, I present data for SK Hynix, forecasting ASPs through CY 2019.

Chart 2

In Chart 3, I present data for Micron Technology, forecasting ASPs through FY 2019.

This article was written by

Robert Castellano profile picture
Providing a deep knowledgebase for better semiconductor stock investments

Dr. Robert N. Castellano, is president of The Information Network www.theinformationnet.com. Most of the data, as well as tables and charts I use in my articles, come from my market research reports. If you need additional information about any article, please go to my website.

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I received a Ph.D. degree in chemistry from Oxford University (England) under Dr. John Goodenough, inventor of the lithium ion battery and 2019 Nobel Prize winner in Chemistry. I've had ten years experience in the field of wafer fabrication at AT&T Bell Laboratories and Stanford University.

I have been Editor-in-Chief of the peer-reviewed Journal of Active and Passive Electronic Devices since 2000. I authored the book "Technology Trends in VLSI Manufacturing" (Gordon and Breach), "Solar Panel Processing" (Old City Publishing), "Alternative Energy Technology" (Old City Publishing). Also in the solar area, I am CEO of SolarPA, which uses a proprietary nanomaterial to coat solar cells, increasing the efficiency by up to 10%. I recently published a fictional novel Blessed, available on Amazon and other sites.

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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