Micron and the memory market
In this series, we’ve seen that the last two years have been phenomenal for Micron (MU) as well as the overall memory market. The total addressable markets for DRAM (dynamic random access memory) and NAND (negative AND) have reached record highs.
Micron CEO Sanjay Mehrotra expects the memory industry’s total revenues to grow 29.0% YoY (year-over-year) to $168.0 billion this year. However, he expects NAND growth to slow in the year as an oversupply situation is expected to reduce its prices.
Mehrotra expects the oversupply to decline in the first six months of 2019. Analysts expect DRAM prices to peak in the third quarter and start falling in the fourth quarter when new DRAM capacity for Samsung and SK Hynix is expected to come online.
Investors are concerned that rising inventory and falling prices could create a memory downturn and pull down Micron’s earnings as in the previous memory cycles. There are concerns that a slowdown in PC shipments due to CPU (central processing unit) supply shortages and weak smartphone demand could impact memory demand.
However, Mehrotra noted that the memory market has reduced its dependence on PCs and smartphones. He added that the market has become more secular with demand from new markets like automotive and server, which could help sustain growth.
Samsung plans to reduce capacity expansion
A Bloomberg report, citing sources with knowledge of the matter, stated that Samsung might lower its planned output growth in 2019 due to concerns of declining memory prices. Memory is an oligopoly market led by a few players—Samsung is the largest memory chip maker among them. So, any move by Samsung is a reflection of the memory market.
This comes as positive news, as it shows supply discipline among memory suppliers. Disciplined supply could prevent memory prices from falling to a level that pushes suppliers into losses, which occurred with Micron in 2016.
In the final part of this series, we’ll see what analysts think about Micron stock.
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