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How DRAM and NAND Market Forces Could Play Out for Micron in 2019

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Nov. 20 2020, Updated 10:08 p.m. ET

Micron’s exposure to the memory market

Micron Technology (MU) is the third-largest DRAM[1.dynamic random access memory] and NAND[2.negative AND] chip maker after Samsung (SSNLF) and SK Hynix. Among peers, Micron has the most comprehensive portfolio of DRAM, trade NAND, NOR flash, and 3D XPoint products.

Memory is a commodity largely governed by market demand and supply forces, as there is little difference in the performance of different companies’ memory chips. Because they cannot control prices, suppliers improve their profits by reducing production costs. 

D1_Semiconductors_MU_Revenue 1Q19 

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Micron’s cost competitiveness

Samsung has been a price leader for many years because of its advanced technology node. Memory prices rose over the last two years, prompting Micron to significantly reduced its technology gap with Samsung to become cost competitive. Rising prices and falling costs improved its profit margin from 2% in the fourth quarter of fiscal 2016 to 52.6% in the fourth quarter of fiscal 2018.

DRAM

DRAM supply caught up with demand after two years of undersupply, but the demand started to decline, pulling down memory prices. In the first quarter of fiscal 2019, Micron’s DRAM revenue fell 9% sequentially to $5.4 billion as its ASPs (average selling prices) fell by a high-single-digit percentage rate and volumes were flat.

DRAM prices are set to fall further in the second quarter of fiscal 2019 as PC and server DRAM demand slows due to a high customer inventory and CPU (central processing unit) supply shortage at Intel (INTC). We expect DRAM revenue to fall 24% sequentially during the quarter.

NAND

Micron’s NAND revenue fell 1.2% sequentially to $2.2 billion in the first quarter of fiscal 2019 as ASPs’ decline was largely offset by sales volume growth. NAND demand is elastic, meaning sales volumes rise as prices decline. The company expects NAND revenue to fall in fiscal 2019 as it transitions from SATA[3.serial advanced technology attachment]-interface SSDs[4.solid-state drives] to NVMe[5.nonvolatile memory] SSDs. We expect NAND revenue to fall 25% sequentially in the second quarter. In this series, we’ll look at Micron’s DRAM and NAND businesses and discuss how demand and supply forces could play out in these markets.

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