Micron (MU)

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Worries that the market for DRAM and NAND chips will cool this year are flawed, writes Daniel Kim with Macquarie Research. He thinks prices will keep rising because supply will remain tight and Apple and other manufacturers have no other choice but to pay up to build their wares. That may be good for Micron and Western Digital and Samsung, among others.

Micron, Western: DRAM, NAND Prices To Continue Higher, Says Macquarie - Barron's

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Yangtze Memory Technology Co. (YMTC) intends to be making 32-layer 3D-NAND flash memory chip by the end of 2017, according to a Digitimes article quoting Charles Kau, acting chairman of the Wuhan based company. The company – also known as Yangtze River Storage – then plans to move quickly to 64-layer 3D-NAND and in addition is considering developing its own DRAM manufacturing technology in a 18nm manufacturing process, the report said.

Chinese 3D-NAND flash coming this year? | EETE Analog

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DRAM Price Surge Continues

Dylan McGrath

5/26/2017 07:51 PM EDT 
2 comments

SAN FRANCISCO—Global DRAM sales reached a record high of $14.1 billion in the first quarter, driven by a roughly 30 percent increase in the average contract price of PC DRAM modules, according to memory chip price tracking firm DRAMeXchange.

First quarter DRAM revenue was up by more than 13 percent compared with the fourth quarter of 2016, the firm said.

According to DRAMeXchange, most PC OEMs negotiated first quarter DRAM contracts at the end of 2016, when DRAM was in tight supply. Not only did these price increases affect PC DRAM, but they also spilled over into the server and mobile DRAM markets, increasing the price of mobile DRAM products by nearly 10 percent on average, according to the firm.

Global revenue for mobile DRAM fell by just 1.7 percent in the first quarter compared to the fourth quarter of 2016, DRAMeXchange said. Sales of mobile DRAM typically fall off precipitously between the fourth quarter and the first quarter, coming off the holiday season.

Tight supply in the DRAM market should continue for a while longer. Avril Wu, research director at DRAMeXchange, said in a press statement that the firm expects additional DRAM manufacturing capacity to be available in the second half of this year or later to meet the demand.

"As for this second quarter, the mobile DRAM market has cooled down temporarily, but the server DRAM market is still quite hot," Wu said. She added that DRAMeXchange expects average DRAM prices to increase by more than 10 percent in the second quarter.

The three largest DRAM producers — Samsung Electronics Co. Ltd. and SK hynix Inc. of South Korea and Micron Technology Inc. of the U.S. — all enjoyed significant increases in operating margins during the first quarter and will continue to do so in the second quarter, according to DRAMeXchange.

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Micron’s earnings are directly proportional to DRAM ASPs since Micron earns more than 60.0% of its revenue from DRAM. Many industry experts expected DRAM ASP to fall in 2Q17 as seasonal PC demand faded, thereby affecting Micron’s margins. So analysts lowered their ratings and price targets for MU stock.

Has Micron Technology Reached the Peak of Its Memory Cycle? - Market Realist

According to DRAMeXchange, PC (personal computer) DRAM prices were flat in April 2017. Average contract prices for server DRAM rose 10.0% in 2Q17. DRAMeXchange said that April and May are seasonally weak months for the DRAM market as the demand from the Chinese New Year fades and the next demand growth from the back-to-school season hasn’t picked up yet. The second half of the year is seasonally strong for DRAM since several OEMs (original equipment manufacturers) stock up inventory in preparation for the holiday season. Many semiconductor analysts expect DRAM prices to continue to rise throughout 2017 since they expect demand to continue to surpass supply.

Has Micron Technology Reached the Peak of Its Memory Cycle? - Market Realist

Micron will report a blowout quarter as the street expects it to. "Micron's management needs to raise its forecast enough to convince people that its business still hasn't reached saturation," added Cramer.

Game Plan For The Week - Cramer's Mad Money (6/23/17) | Seeking Alpha

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Sales of DRAM and NAND flash memory are both expected to set new records amid tight supply in 2017, though white hot growth in average selling prices (ASPs) are expected to cool through the end of the year, according to market research firm IC Insights. DRAM ASPs are projected to increase by 63 percent this year, while NAND ASPs are expected to grow by 33 percent, according to IC Insights. These numbers would mark record ASP growth for each category, the firm said.

Memory Chip ASP Growth Expected to Cool in Second Half | EE Times

IC Insights expects flash memory capital spending to increase significantly in 2017, with nearly all of the new investment going toward 3D NAND flash memory technology. Samsung, SK Hynix, Micron, Intel, Toshiba/SanDisk, and XMC/Yangtze River Storage Technology each plan to significantly ramp up 3D NAND flash capacity over the next couple of years, and new Chinese players may enter the market, putting the likelihood of overcapacity in the market for 3D NAND over the next few year very high, IC Insights said.

Memory Chip ASP Growth Expected to Cool in Second Half | EE Times

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Micron Technology, Inc. (NASDAQ:MU) DRAM pricing guide for the third quarter is looking more robust than Baird analyst Tristan Gerra had anticipated, and with DRAM trends for the back half of the year tracking higher than previous forecasts, the stock’s value is appealing. As such, the analyst reiterates an Outperform rating on shares of MU with a $48 price target, which represents a 56% increase from where the stock is currently trading. (To watch Gerra’s track record, click here) Gerra notes, “DRAM inventories at both PC and data center OEMs remain below normal levels, with continued inventory replenishments now expected through 1H18. – We previously thought these replenishments would be completed by end of C3Q17.” Additionally, with initial DRAM supply bit growth guide for next year standing at roughly 20%, the analyst believes, “Rexchip’s 1xnm ramp could help Micron gain DRAM market share in 2018, in our view. – New hardware features in PCs could potentially prevent units from declining next year, post an expected low-single-digit growth this year.

Micron Technology, Inc. (MU) DRAM 3Q Pricing Guide Soaring Beyond Expectation - Smarter Analyst

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Samsung Electronics Co. Ltd. has said it expects to spend $7 billion over the next three years to increase NAND memory chip production at its wafer fab in Xi'an, in northwest China. The company made the disclosure in a regulatory filing reported by numerous news agencies. In the filing Samsung said that it had approved $2.3 billion of spending out of an expected three-year investment of $7 billion. Samsung announced in July an investment of $18.6 billion in South Korea and said it would add a fab building at its NAND plant in Xi’an, China, but did not set an investment amount (see Samsung starts production at world's biggest fab ).

Samsung to spend $7bn on Chinese NAND expansion | eeNews Europe

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DRAM and NAND prices are going up and projected to rise further, according to market analysts. Many people perceive the current memory market situation as a temporary imbalance between supply and demand. Or, they expect the market to settle when the manufacturing of 3D NAND flash reaches maturity. However, In case of DRAM market, no one knows when DRAM supplies will improve. Observing the demand, although some market segments are growing, there are no killer applications or booming market segments. Therefore, the problem originates from the supply side.

Why Memory Prices Are Heating Up | EE Times

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Wall Street rarely likes to talk about mistakes, but Goldman Sachs admitted it underestimated the strength of the memory chip market when it downgraded Micron (MU) shares in May. The firm reversed course and raised its rating for chipmaker's shares on Tuesday to buy from neutral, predicting the company will generate earnings above Street expectations in fiscal 2018. Micron's stock is up 56.4 percent year to date through Tuesday compared with the S&P 500's 11.5 percent gain.

Goldman: We messed up on this red-hot chip stock, time to buy it now