Micron in the NAND market
Micron Technology (MU) is a pure-play memory chip maker that earns 64% of its revenue from DRAM (dynamic random access memory) and 30% from NAND (negative AND). NAND is a storage chip and its demand is sensitive to price. Micron is the third largest NAND chipmaker after South Korea’s Samsung (SSNLF) and Japan’s Toshiba with a 15.4% market share in the first quarter, according to DRAMeXchange.
NAND prices have been falling since last year, as most chipmakers transitioned from 2D planar NAND to 3D NAND, which created an oversupply situation. According to the DRAMeXchange, all NAND chipmakers’ NAND ASPs (average selling price) fell between 20% and 30% in the first quarter and are expected to continue falling in the second quarter.
In the first quarter, Micron’s NAND revenue fell 18% sequentially, whereas Samsung’s and Toshiba’s NAND revenue fell 25% and 20.2%, respectively. Micron performed better than its competitors because of its cost leadership and product mix.
Micron in the DRAM market
The DRAM is the memory of a device and an important component that determines the performance of a device. Thus, DRAM demand is not sensitive to price. However, the DRAM market faced an oversupply situation in the second half of 2018. This situation was aggravated as demand from the server market fell, the graphics card market was hit by excess inventory from the crypto bubble burst, and Intel faced a CPU (central processing unit) supply shortage.
According to DRAMeXchange, DRAM prices fell nearly 30% in the first quarter, marking the industry’s steepest decline since 2011. Micron’s DRAM revenue fell 30% sequentially in the fiscal 2019 second quarter, whereas Samsung’s and SK Hynix’s DRAM revenue fell 26.3% and 31.7%, respectively. Here, Samsung has a cost advantage over Micron, which helped the former mitigate the impact of falling DRAM prices.
Micron and other memory chipmakers have reduced their production to bring industry supply in line with demand and slow the price declines. However, the Huawei ban is putting pressure on memory demand, delaying chipmakers’ efforts to balance demand and supply and stabilize memory prices. The higher-than-expected decline in DRAM and NAND prices will lower Micron’s DRAM earnings guidance for the fourth quarter of fiscal 2019.