Firms might see relief in DRAM prices
According to Mark Newman, an analyst from Bernstein, heavyweights in the memory space such as Micron (MU), Korea’s (EWY) Samsung (SSNLF), and SK Hynix (HXSCF) may see an improvement in DRAM (dynamic random-access memory) prices. “PC DRAM pricing in December showed signs of stabilization, with contract price flat on MoM basis and spot price down 2% over the same period,” stated Newman. The analyst has an “outperform” rating on all three of the above stocks.
PC (personal computer) DRAM prices were flat month-over-month in December 2015. 4 GB PC DRAM spot prices fell 2% in December 2015. Newman states that though firms are heading “into a seasonally weak quarter,” firms should be encouraged by the strong pricing trend observed last month. Server DRAM prices have been in a freefall since October 2015, where they fell 5%. Prices in this space also fell 9% month-over-month in December 2015.
Market supply will exceed demand in 2016
In contrast to the above estimates, DRAMeXchange expects DRAM prices to fall in 2016 as well. Last year, DRAM prices fell due to weak demand and excess supply, driven primarily by the fall in PC DRAM prices.
According to DRAMeXchange, although production capacity has not increased significantly, DRAM suppliers are still profitable as the market is largely captured by three major players: Micron, Samsung, and SK Hynix. Avril Wu, research director of DRAMeXchange, expects the annual demand and supply growth to be 23% and 25%, respectively, in 2016. As supply will outpace demand, the firm expects average sales prices to fall.
Micron constitutes 3.2% of the VanEck Vectors Semiconductor ETF (SMH).