Micron sees growth in memory space
In the previous part of this series, we saw that Micron Technology (MU) is investing aggressively in the DRAM (dynamic random access memory) and NAND (negative AND) market over an anticipation of growth in 2017 and beyond. Let’s look at the company’s growth estimates for the memory market.
Although slowing PC and smartphone sales concern many semiconductor companies, many research firms believe that demand headwinds will fade over time. With continuous improvement in technology, PCs and smartphones will contain more DRAM and NAND, thus increasing the demand for memory chips.
Growth opportunities in DRAM
The key factor on which Micron Technology (MU) is relying to grow in this slowing market is a dynamic product mix. As seen from the above graph, the demand for DRAM has shifted away from PCs to smartphones and servers. Moving with this trend, the company has increased its exposure in mobile DRAM and is now eyeing the server market. A similar approach has been adopted by Intel (INTC), which is moving away from PCs to data centers.
According to Micron and industry analysts, as the technology improves, the DRAM content in smartphones and servers should grow at a CAGR (compounded annual growth rate) of 25% and 40%, respectively, between 2016–2019.
Growth opportunities in NAND
NAND demand has also shifted from USB flash drive to smartphones and SSDs (solid-state drives). The SSD prices are also falling at a sharper rate and are slowly replacing HDDs (hard disk drives) in laptops and desktops. The NAND content in smartphones and PCs is expected to grow at a CAGR of 40% and 50%, respectively, between 2016–2019.
Breakthrough memory chip
While Micron Technology (MU) expects growth in memory content could drive future growth despite the slowdown in the consumer market, it continues to invest in breakthrough innovation. After years of research, the company has developed a revolutionary memory chip, 3D XPoint, in collaboration with Intel.
In the next part of this series, we will shed more light on the impact of this technology. The VanEck Vectors Semiconductor ETF (SMH) has exposure in 26 semiconductor stocks, including 17.31% in INTC and 2.67% in SNDK.