Entering text into the input field will update the search result below

Micron Technology: Supply-Demand Balanced By Capex Spend

Nov. 01, 2021 12:51 PM ETMicron Technology, Inc. (MU)HXSCL, SSNLF60 Comments


  • Micron is anticipating healthy industry supply-demand balance and robust profitability for both DRAM and NAND in the year.
  • Amid rising market uncertainties, Micron and peers are judiciously controlling capex spend to maintain profitability.
  • Server memory demand is robust thanks to significant capex spend by hyperscaler companies.
  • DRAM ASP growth remains healthy amid hyperbole of spot price declines.
  • This idea was discussed in more depth with members of my private investing community, Semiconductor Deep Dive. Learn More »
An illustration representing a computer circuit board and a car chip.

Jae Young Ju/iStock via Getty Images

Now that Samsung Electronics (OTCPK:SSNLF) and SK Hynix (OTC:HXSCL) announced third quarter earnings, which followed a month after Micron (NASDAQ:MU), we can examine and compare DRAM and NAND results and metrics. Equally important, we can examine ASPs (average

This free article presents my analysis of this semiconductor sector. A more detailed analysis is available on my Marketplace newsletter site Semiconductor Deep Dive. You can learn more about it here and start a risk free 2 week trial now.

In my Semiconductor Deep Dive article, I also include and analysis of the NAND sector.

This article was written by

Robert Castellano profile picture

Robert Castellano has 38 years of experience analyzing the semiconductor markets.

He runs the investing group Semiconductor Deep Dive. It provides investors with recommendations for stocks with the greatest near- and medium-term growth potential. Members receive detailed analysis and research tools to make investments in semiconductor and tech stocks. Learn more.

Analyst’s Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, and no plans to initiate any such 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.

Seeking Alpha's Disclosure: Past performance is no guarantee of future results. No recommendation or advice is being given as to whether any investment is suitable for a particular investor. Any views or opinions expressed above may not reflect those of Seeking Alpha as a whole. Seeking Alpha is not a licensed securities dealer, broker or US investment adviser or investment bank. Our analysts are third party authors that include both professional investors and individual investors who may not be licensed or certified by any institute or regulatory body.

Recommended For You

Comments (60)

Robert, why Micron CFO has not announced dividend date? This is strange.
oldbeachlvr profile picture
@tzeshan they probably want to announce it at the time of their earnings release
@tzeshan it's not strange - they'll confirm it at ER and ex date is most likely going to be 12/30/2021
I think yesterday CS presentation didn't impress algo and traders. MU spiked to $89 and starts it down trajectory.
Robert, I would like to hear your comments on the last DRAM contract prices for October just published on DrameXchanchange.
Thank you
Robert Castellano profile picture
@danirak OMG is DRAMeXchange still in business!
Happy Thanksgiving! DRAMeXchange is all green today.

"Shares of memory chip makers Micron Technology(MU) and Western Digital(WDC) were climbing in premarket trading after an analyst at Mizuho Securities raised the stocks to Buy, citing improved demand for memory chips.

Micron was rising 2.8% to $86.20. Western Digital(WDC) rose 3.6% to $59.

Mizuho Securities analyst Vikay Rakesh had downgraded both stocks to Neutral in October after forecasting a soft demand outlook for memory chips during the first half of the companies' fiscal years.

New data indicated actual demand was improving across PCs, servers and handsets that "could support an improved pricing," prompting Rakesh to raise the stock to Buy and boost his price targets. The new target for Micron is $95, up from $75, and the new target for Western Digital(WDC) is $75, up from $55.

Rakesh estimates that first-quarter PC and netbook builds will only decrease between 0% and 5% quarter over quarter, up from previous estimates that they would fall between 10% and 15%. PC demand alone could be up as much as 5% year over year, a shift Rakesh said was surprising given Wall Street consensus that demand would be down between 2% and 3%.

Requests for memory chips in China also could improve compared to previous estimates, as well as orders from server hosts like Amazon ( AMZN) and Google (GOOGL). An additional boost could come from upcoming investments in the metaverse and virtual reality.

Micron may be a new darling among analysts. Last week, Evercore ISI analyst C.J. Muse added Micron to his list of top stock picks, anticipating a return to earnings growth next year.

In his note, Muse wrote that while shares of chip makers like Micron have lagged behind the PHLX Semiconductor index, or SOX, since early June, the tide may be shifting.

"We believe negative sentiment was due to investor concerns over the sustainability of PC, handsets, and cloud demand, which was also compounded by DRAM spot pricing that began to flatten out in May/June 2021," Muse wrote"
Japan allocates $5.2bn to fund chip plants by TSMC and others
Micron and Kioxia set to get subsidies for domestic memory chip factories

Mizuho upgraded Micron Technology from Neutral to Buy and set a new price target of $95.00 from $75.00 previously.

11/22/2021 Wells Fargo & Company rating Reiterated Rating Buy $115.00
i_am_seeker_2 profile picture
Here come the sheep.

Analyst Ratings
Find Analyst Ratings for:

Date Research Firm Action Current PT
11/23/21 Mizuho Upgrades Buy 95.0
10/25/21 Bernstein Initiates Coverage On Underperform 58.0
10/20/21 Mizuho Downgrades Neutral 75.0
10/15/21 Goldman Sachs Maintains Buy 88.0
9/29/21 UBS Maintains Buy 90.0
9/29/21 Susquehanna Maintains Positive 125.0
9/29/21 Mizuho Maintains Buy 90.0
9/29/21 Deutsche Bank Maintains Buy 90.0
9/29/21 Barclays Maintains Overweight 87.0
9/27/21 Raymond James Maintains Strong Buy 100.0
@i_am_seeker_2 looks like Mizuho finally read Robert’s article.
@i_am_seeker_2 interesting the Goldman analyst (harari or something?) maintained a BUY reiteration right near the shorter term bottom in mid-October when MU was at $67-68.

LOL, maybe his bosses thought it had much further downside.
You were right on MU stock. Excellent job.
@Robert Castellano

What do you think of this article
Is it true that us is still blocking ASML from selling the latest technology chip making equipment EUV to Korea's SK Hynix to China locations?


The Wuxi factory is critical to the global electronics industry because it makes about half of SK Hynix's DRAM chips, which accounts for around 15 percent of the global total.

If they can't expand their DRAM production Samsung and MU will own the DRAM market and demand will greatly exceed supply, causing prices to remain VERY HIGH ?
i_am_seeker_2 profile picture
@rm33 Hynix will shift NAND production to Wuxi and move DRAM production back to S. Korea. IMHO, even the S. Korean govt would welcome that and probably would even help them financially. The SK govt doesn't want to see China ruin the DRAM market any more than the US govt wants that to happen. In fact, even less so, since a strong DRAM sector is critical to the health of both Samsung and Hynix and they are critical to the health of the SK economy.
Robert Castellano profile picture
@rm33 The US overreach again - forcing chip suppliers to divulge details of customers, keeping INTC from building in China while giving them money to build in US, and now stopping SK from an EUV lithography system for its plant in China.
I don't blame them though. The following China New Year after the EUV install, when plants are closed for a week, I can just envision all the reverse engineers decending on the SK plant. And that's not to mention all the CCP employees implanted at the plant with their spy cameras.
Robert, it looks like analysts suddenly took their smart pills
Up almost 8 % today..
DRAM prices to retreat in 4Q21 after strong gains

i_am_seeker_2 profile picture
@rm33 This same story has been repeated about 10 times by now in different publications over the past couple of weeks since Trendforce put it out.
@rm33 NO, not to "retreat"

" PC and server DRAM prices are expected to slip 0 5% in the fourth quarter, IC Insights said."

After a 37 % increase during the first 3 quarters, they EXPECT a Zero to 5 % reduction.
"IT" could be nothing --like 0 % " but lets be Chicken Little

And most important .. This is "price" NOT Volume !
Does anyone know what a price/demand chart looks like --Econ 101
Price reduction in electronics is a natural event , we know that, but lets everybody get their knickers in a uproar .
Im long on MU.
Thank you, Robert.
Gary Schuster profile picture
@Robert Castellano Nice article, but I don't understand chart 1. It shows plots of the average DRAM selling prices from Hynix, Samsung and Micron from 2016 thru 2021. Micron always shows the lowest average selling price. The price differential varies with time, but it is typically quite significant. For example, the most recent data (3rd quarter of 2021) shows Micron's DRAM's ASP at about $0.47, Samsung's at about $0.50 and Hynix's at about about $0.65. So Hynix, on average, is selling its DRAM for about 38% more than Micron!? This is particularly surprising given that Micron has the most technologically advanced DRAM. Please comment on why this price differential exists and whether there is anyway to eliminate it.
Robert Castellano profile picture
@Gary Schuster This chart is really meant for trend not absolute values. What I did when I started these charts is get the ASP at that quarter. Then each successive quarter the companies would give ASP changes and I calculate the new ASP. So the data are quantitative from that aspect, but started from one datapoint for each company.
Now to get back to your question, each company has a lot of different DRAM devices. Some are more expensive than others based on application such as server vs general purpose, and some are more expensive based on technology such as DDR5 vs DDR4. So each company has a variation in ASPs, and then give just 1 number that is subject to interpretation, such as "high upper single digits." They all do it,
Nvidia up 12%, AMD up 5% yesterday, apparently due to more processing power needed for the metaverse. So why isn’t Micron up substantially too? Surely more memory will be needed too. Micron have such state of the art memory choices.
Here’s my two cents. Micron really need to publically market their products, so that Micron is the preferred memory choice. Get rid of the ‘Crucial’ brand and call it ‘Micron Crucial’. Do a few TV adverts. Stick ‘Micron Inside’ labels everywhere. Come on sleepy Micron, wake up! I’m a shareholder of this great company and I want them to wake up! Get busy and market their brand.
Robert Castellano profile picture
@1402john Those adverts will affect the bottom line and affect exec's bonuses. So its cheaper for them to be part of analyst-hosted events and be a cheerleader. Unfortunately the earning calls come every 3 months and Mehrotra blew the last one.
@Robert Castellano He gave a rosy forecast for next two years in early this year. This caused analysts to raise expectations. He failed to see price adjustment now. He should be more conservative in forecast. MU suffered because of this miss. Hopefully MU can beat expectations this quarter because of all the new products announcements from the big high tech companies recently.
FabulousBoringRoy profile picture
Looking at Anandtech's Alder Lake conclusion it sounds like DDR5 is bringing a significant performance increase to a few workloads. I think Micron is going to be selling a lot of DDR5 over the next few years.
FabulousBoringRoy profile picture
Qualcomm guidance is looking pretty healthy for smartphone shipments.
Greg_Maryland profile picture
Great note, I'm long MU.
Sunil Shah profile picture
@Robert Castellano
I posted this on my article 2 hours before your article was published:

Samsung sets to triple foundry capacity by 2026, sparking concerns about potential risks
Amanda Liang, Taipei; Willis Ke, DIGITIMES



"Samsung Electronics has recently disclosed plans to triple its foundry production capacity by 2026 amid global chip shortage disrupting production in key industries from automobiles to smartphones, but market concerns are emerging that the bold move..."
@Robert Castellano thank you as always , this is very helpful context
zito profile picture
Worldwide semi shortage of all chips except memory? TSM trading at forward PE of 30; Micron PE8. Lot's of upside at this level.
Disagree with this article? Submit your own. To report a factual error in this article, . Your feedback matters to us!
To ensure this doesn’t happen in the future, please enable Javascript and cookies in your browser.
Is this happening to you frequently? Please report it on our feedback forum.
If you have an ad-blocker enabled you may be blocked from proceeding. Please disable your ad-blocker and refresh.