NAND has elastic demand
Micron Technology (MU) is in the midst of the data economy as it supplies memory and storage chips to process and store data. While DRAM (dynamic random-access memory) is used to process data, NAND (negative AND) is used to store data.
In the data economy, almost all devices collect data to deliver insights to consumers and enterprises. More data need more storage, which is increasing the demand for NAND. However, NAND isn’t a mandatory component for delivering performance. Therefore, it has elastic demand whereby demand is sensitive to price.
Micron’s NAND demand forecast
As we can see in the graph above, NAND demand rose 325% between 2013 and 2017 largely driven by mobile NAND, as this was the mobile era. This period also saw the increasing adoption of client and enterprise SSDs (solid-state drive) as PC and server makers started replacing HDDs (hard disk drives) with SSDs.
Looking at this trend, HDD maker Western Digital (WDC) acquired the second-largest SSD maker, SanDisk, in 2016. Even Intel (INTC) started manufacturing 3D NAND and enterprise SSDs for its server processors. Now the SanDisk team is leading Micron and improving its SSD capabilities.
NAND demand drivers from 2017 to 2021
Micron expects NAND demand to grow at a compound annual rate of 40%–45% between 2017 and 2021. This growth should largely come from the more advanced client and enterprise SSDs. Mobile will also be a key demand growth driver as the increasing use of high-definition videos and images demands more mobile storage space.
Because NAND demand is elastic, NAND makers would benefit more from a higher volume of sales than a higher average selling price.
Next, let’s see how Micron is planning its NAND production based on the above-mentioned demand forecast.