Micron’s response to slowdown in memory space
Micron Technology’s (MU) ability to generate cash depends largely on the selling price of its core products—DRAM, NAND Flash, and NOR Flash. But the prices of DRAM and NAND have been falling since the start of 2015, and these are expected to fall further as other key players like Samsung Electronics (SSNLF) and SK Hynix move to 20-nm (nanometer) and 16-nm technology to increase their DRAM and NAND output. Amid this slowdown in memory space, Micron plans to increase its capital expenditure.
Slowing demand for memory products
While the demand for PC and server DRAM has continued to fall, the demand for mobile DRAM has increased in 2Q15. According to DRAMeXchange, global mobile DRAM revenues rose by 7.7% on a YoY (year-over-year) basis to $3.85 billion in 2Q15. However, the slow recovery of the global economy is affecting demands from smartphone, tablet, and notebook vendors in 2H15. DRAMeXchange expects the growth of global smartphone shipments to slow from an estimated 8.3% YoY in 2015 to 5.8% YoY in 2016.
Diversified demand for memory products
In its 2015 Summer Analyst Day presentation, Micron projected that long-term demand for memory products will diversify as a variety of customers will demand different memory solutions. The company said the demand for DRAM is shifting from PCs to enterprise storage and that the demand for NAND is shifting from mobile to SSDs (solid-state drives). Key players are thus looking to expand their product offerings either through acquisitions or R&D (research and development).
Memory suppliers boost capital spending
Micron estimates that it will spend between $3.6 billion and $4.0 billion on property, plant, and equipment in fiscal 2015. This includes its planned expansion of a Singapore (EWS) fabrication plant, or fab, that is expected to start producing 3D NAND Flash in 2017. Toshiba Corporation (TOSBF) and ScanDisk (SNDK) are also building a fab in Japan, which is expected to start producing 3D NAND Flash in 2016.
In the next part of this series, we will look at Micron’s strategy to tackle the diversifying demand in the memory space.