Why supply constraints drive growth in the memory space



The memory industry’s consolidation led to supply constraints in 2013

In 2012, the memory industry faced issues with a demand and supply imbalance, which led to excess inventory and declining prices. However, in 2013, the memory industry consolidated, which led to only a few players remaining in this industry. According to a report from Gartner, the memory market grew 23.5% in 2013, mainly led by growth in the DRAM market, while the overall semiconductor market grew 5% in 2013. The main driving factor for memory market growth wasn’t the sudden increase in demand, but supply constraints that led to increasing prices. Industry consolidation led to the weak supply growth.

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Micron jumped five places in the rankings for the worldwide semiconductor market

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According to the same report, Micron (MU), which placed tenth in the rankings for the worldwide semiconductor market in 2012, jumped five places in 2013 after it acquired Elpida. In the previous part of this series, we discussed how Elpida helped in turning around Micron’s fortunes in 2013. As the chart above shows, Intel (INTC), Samsung (SSNLF), Qualcomm (QCOM), and SK Hynix are some of the players still ahead of Micron in the semiconductor market. Intel continues to dominate this industry, mainly due to its dominance in supplying chipsets for PCs.

Micron believes that DRAM industry’s demand and supply balance will continue

During the conference call to announce the company’s fiscal Q3 2014 earnings, Micron’s management mentioned, “The supplier base is consolidated in DRAM and stabilized in NAND and we believe that in both markets, the industry is in a stage of maturity such that each supplier has sufficient scale to compete. Driven by a slowing rate of technology migration, supply bit growth trends have stabilized at a level below historical average. There appear to be only limited additions of new wafer capacity on the horizon. Applications requiring memory continue to grow and our customer base continues to diversify. We remain committed to delivering differentiated and system level products to meet the needs of this increasingly interesting and valuable market. We continue to forecast long-term demand in line with or above supply for DRAM.”


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