Jan 02, 2023
When Will Memory Semiconductors Hit Bottom?
Ryunsu Sung
Due to the significant supply/demand mismatch entering calendar 2023, we expect that profitability will remain challenged throughout 2023. The timing of the recovery in profitability will be driven by the rate and pace at which supply and demand are brought into balance and inventories are normalized across the supply chain. We believe that negative year-on-year calendar 2023 industry DRAM bit supply growth and flattish year-on-year calendar 2023, industry NAND bit supply growth would accelerate this recovery.
The above is what Micron said during its fiscal 2023 Q1 earnings conference call.
In short, they are saying that due to the supply/demand imbalance, profitability will be negatively affected throughout 2023, and that the timing of the (price) recovery will depend on when supply and demand normalize across the supply chain.
In the last sentence, they effectively say, “If, on a calendar-year 2023 basis, DRAM bit supply declines and NAND (flash memory) bit supply is flat year-on-year, it would bring forward the timing of supply/demand normalization.” That decision, however, rests entirely with the memory industry’s big brother.
When we talk about the big brother of the memory industry, no matter what anyone says, Samsung Electronics is the first name that comes to mind. In other words, when Micron talks on the conference call about total industry supply and says that the timing of the recovery depends on that, it can be interpreted as a message to Samsung, the industry’s big brother: “Please, cut production.”
Saying that it can be interpreted that way is a polite way of saying that is exactly how you should interpret it.
Memory players such as SK Hynix and Micron (MU) have already announced plans to cut 2023 CAPEX (capital expenditures) by 50% and even implement deliberate production cuts, while Samsung Electronics alone has effectively declared, “We’re not doing that.”
To put it bluntly, depending on what decisions Samsung Electronics’ management makes, memory semiconductor prices may well find a bottom sometime in 2023—or they may not.
If we compare the current cycle with the most similar past cycle, the 1999–2001 period, we can see that investors should still be prepared for at least two more quarters of revenue decline to feel comfortable putting money to work.
Therefore, it is hard to agree with the view that memory semiconductors are currently bottoming out.
For now, it is difficult to expect an immediate rebound in share prices, as the results have not been utterly disastrous, and market participants’ expectations are still alive.
Newsletter
Be the first to get news about original content, newsletters, and special events.