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Signaling from Micron Technology Inc. is displayed on a ground monitor on the New York Stock Exchange (NYSE) in New York. Photographer: Michael Nagle / Bloomberg© Bloomberg Finance LP 2016
Micronthe world's second-largest maker of memory, has seen its price drop more than 40% in the last six months, currently trading at about $ 36 per share. The sale was largely driven by weak NAND memory prices and the expected slowdown in the DRAM market, which largely contributed to Micron's earnings growth. Below, we examine the potential impact of Micron's DRAM business.
Check out our interactive dashboard analysis on what motivates our assessment for Micron. We are updating our model to reflect the company's results for the prior year.
DRAM has been Micron's largest source of recent growth
DRAM is one of the main drivers of Micron's business, accounting for more than two-thirds of its total turnover. The segment has outperformed over the last two years, driven by demand from the cloud, enterprise, mobile and graphics markets, as well as stronger sales in the markets. higher value. In 2018, Micron reported that sales of its DRAM products increased by 64%, with ASP increasing by 35% and volumes growing by 20%. However, things could cool down as the market enters a phase of overproduction. While prices rose slightly in the third quarter of 2018, contract prices fell in October and DRAMeXchange anticipates that the price of DRAM could down 5% or more in Q4 2018, ending a series of nine consecutive quarters of price growth.
Expect more pronounced short-term declines
It is likely that price declines will be more pronounced in the future, with DRAMeXchange forecasting a 15% to 20% drop from year to year in 2019. In addition, unlike NAND chips , which experience some price elasticity of demand, DRAM chips are relatively inelastic. . In fact, device manufacturers only need a certain amount of DRAM to meet the performance requirements of the systems they may have already worked on, and they are unlikely to buy more DRAMs. taking advantage of lower prices.
Micron, for its part, is continuing its technological transitions to reduce costs and improve the performance of its DRAM memories. The company has increased production of 1x nm chips, whose process node is between 10 and 19 nm, noting that sales of its chips 1y – nm – which probably contain more transistors – could begin before the end of the calendar . 2019. That being said, it is unlikely that these cost reduction efforts will be sufficient to offset the impact of the rapid decline in prices.
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Signaling from Micron Technology Inc. is displayed on a ground monitor on the New York Stock Exchange (NYSE) in New York. Photographer: Michael Nagle / Bloomberg© 2016 Bloomberg Finance LP
Micron, the world's second-largest maker of memory, has seen its price drop more than 40% in the last six months, currently trading at about $ 36 per share. The sale was largely driven by weak NAND memory prices and the expected slowdown in the DRAM market, which largely contributed to Micron's earnings growth. Below, we examine the potential impact of Micron's DRAM business.
Check out our interactive dashboard analysis on what motivates our assessment for Micron. We are updating our model to reflect the company's results for the prior year.
DRAM has been Micron's largest source of recent growth
DRAM is one of the main drivers of Micron's business, accounting for more than two-thirds of its total turnover. The segment has outperformed over the last two years, driven by demand from the cloud, enterprise, mobile and graphics markets, as well as sales growth in the markets. high value markets. In 2018, Micron reported that sales of its DRAM products increased by 64%, ASPs by 35% and volumes by 20%. However, things could cool down as the market enters a phase of overproduction. While prices increased slightly compared to the third quarter of 2018, contract prices decreased in October and DRAMeXchange expects DRAM prices to drop 5% or more in the fourth quarter of 2018, ending a period of nine consecutive quarters of price growth.
Expect more pronounced short-term declines
It is likely that price declines will be more pronounced in the future, with DRAMeXchange forecasting a 15% to 20% drop from year to year in 2019. In addition, unlike NAND chips , which experience some price elasticity of demand, DRAM chips are relatively inelastic. . In fact, device manufacturers only need a certain amount of DRAM to meet the performance requirements of the systems they may have already worked on, and they are unlikely to buy more DRAMs. taking advantage of lower prices.
Micron, for its part, is continuing its technological transitions to reduce costs and improve the performance of its DRAM memories. The company has increased production of 1x nm chips, whose process node is between 10 and 19 nm, noting that sales of its chips 1y – nm – which probably contain more transistors – could begin before the end of the calendar . 2019. That being said, it is unlikely that these cost reduction efforts will be sufficient to offset the impact of the rapid decline in prices.
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