Apple and Samsung Pushing Memory Demand, but for How Long?



Smartphone launches may boost memory demand

So far in this series, we’ve discussed Hewlett-Packard’s (HPQ) comment that we could see a possible shortage of memory products due to suppliers’ focus on smartphones. The comment comes a few days before the launch of Apple’s (AAPL) iPhone 7 and Samsung’s (SSNLF) Galaxy Note 7.

Several media reports stated that Apple might provide 32-GB (gigabyte) memory in the higher-end versions of iPhone 7 and iPhone 7 Plus. HP’s comment about the memory supply shortage supports reports that iPhone 7 would have more memory content than its predecessors.

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Is the increase in memory demand here to stay?

This shift in focus towards smartphones is largely due to Samsung and Apple, which together command a 34% share of the smartphone market. However, this is a seasonal demand and will fade away after iPhone 7 production slows. If the iPhone 7 suffers the same fate of iPhone 6s and 6s Plus, memory sales may fall in the first half of 2017.

Even though the demand for PCs, smartphones, and tablets has slowed, the memory demand will likely rise due to an increase in memory content per phone. SSDs (solid state drives) would be the biggest contributor to NAND growth, driving 41.6% growth in 2016 and 52.2% growth in 2017, according to KDB Daewoo Securities.

Technavio expects the global 3D NAND flash market to grow at a CAGR (compounded annual growth rate) of 92% to $9 billion between 2015 and 2019. The revenue is likely to be driven by increasing demand for mobile devices, which account for 73% of the 3D NAND market.

Given the growth opportunity in 3D NAND, Samsung, SK Hynix, Micron (MU), Intel (INTC), and Toshiba (TOSBF)/SanDisk are ramping up production of 3D NAND.

You can get exposure to the memory suppliers by investing in the SPDR S&P 500 ETF (SPY), which has holdings in US equities listed in the S&P 500 Index. SPY has 0.89% exposure in INTC, 0.09% in MU, 0.13% in HPQ, and 3.1% in AAPL.


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