https://www.fool.com/investing/2019/03/06/dram-prices-are-falling-off-a-cliff.aspx
DRAM Prices Are Falling Off a Cliff
Things are going very wrong for Micron.
Timothy Green
(TMFBargainBin)
Mar 6, 2019 at 8:19AM
So much for the muted downturn that Micron Technology's (NASDAQ:MU) management has been calling for. PC DRAM contract prices will be down a whopping 30% in the first quarter, according to analysis by DRAMeXchange. Inventory levels are still high, offering little hope of a reversal anytime soon.
How bad is the DRAM market right now? The first-quarter pricing decline is the worst since 2011. A shortage of low-end CPUs is exacerbating the problem, eliminating an avenue for demand growth. "The overall market has thus entered freefall, meaning that large reductions in prices aren't going to be effective in driving sales," according to DRAMeXchange.
In other words, about as bad as it gets.
Image source: Getty Images.
Investors may be in for a shock
Micron, which manufactures both DRAM and NAND memory chips, will report its fiscal second-quarter results on March 20. It already wasn't going to be pretty. The midpoint of Micron's guidance calls for revenue to drop by 18% compared to the prior-year period. Adjusted earnings per share are expected to tumble by 61%, the result of sluggish demand and prices dropping faster than Micron's per-bit costs.
Micron's results may come up short of its pessimistic guidance, but its outlook will pose the biggest problem for the stock. Shares of Micron have rallied this year, partly due to the hope that the company will turn the corner sooner rather than later. That now appears unlikely. Given the severity of the price declines in the DRAM market, this downturn could be just as bad as downturns of the past.
Analysts at Susquehanna are expecting Micron to whiff on its outlook. With chip pricing below expectations, analyst Mehdi Hosseini sees excess inventory keeping margins depressed through the second half of the year. Hosseini is neutral on the stock, but he expects Micron's outlook to come in far below the consensus.
Micron stock is not cheap
Shares of Micron look tantalizingly cheap. The stock trades for less than four times fiscal 2018 adjusted earnings and around 5.3 times the consensus analyst estimate for fiscal 2019 adjusted earnings. But that consensus estimate is almost certainly too optimistic. Exactly where Micron's earnings bottom out remains to be seen.
It could be squarely in positive territory if demand picks back up later this year, or it could be in negative territory if this downturn is like previous downturns. Micron posted net losses in fiscal 2009, 2012, and 2016.
MU Price to Tangible Book Value data by YCharts.
Relative to tangible book value, which is a useful metric to look at historically for a commodity manufacturer like Micron, the stock is still well above the lows it typically plumbs during downturns. Shares currently go for around 1.4 times tangible book; that ratio has bottomed out below 1 in each of the past two downturns.
This downturn in the DRAM market doesn't look "muted" or "dampened" at all. It looks like the worst downturn in a long time. Micron investors should brace themselves for a rough earnings report later this month.
Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
https://www.digitimes.com/news/a20190116VL200.html
Fall in 1Q19 DRAM prices larger-than-expected, says DRAMeXchange
Jessie Shen, DIGITIMES, Taipei
Wednesday 16 January 2019
0
Toggle Dropdown
DRAM contract prices are set to fall nearly 20% sequentially in the first quarter of 2019, according to DRAMeXchange, which estimated previously a smaller 15% price decrease.
The article you are trying to open requires News database subscription. Please sign in if you wish to continue.
Login to continue
I forgot my ID and/or password?
Categories
https://www.dramexchange.com/WeeklyResearch/SectionPage.aspx
【Market View】G.SKILL Announces OC World Cup 2019 Competition
Published Mar.11 2019,13:59 PM (GMT+8)
G.SKILL International Enterprise Co., Ltd., the world's leading manufacturer of extreme performance memory and gaming peripherals, is excited to announce the 6th Annual OC World Cup 2019.
【Market View】First Quarter DRAM Contract Prices See a Rare, Large Down-Correction, Resulting in the Sharpest Decline Since 2011, Says TrendForce
Published Mar.05 2019,14:09 PM (GMT+8)
The latest analysis of the PC DRAM market from DRAMeXchange, a division of TrendForce, finds that most contracts are now monthly deals rather than quarterly deals...
【Market View】DRAM Revenue Took a Turn for the Worse in 4Q18; Suppliers Declining in Profitability, Says TrendForce
Published Feb.25 2019,14:17 PM (GMT+8)
Investigations by DRAMeXchange, a division of TrendForce, show that DRAM quotes have taken a turn for the worse in 4Q18...
【Market View】2019 Embedded World：BIWIN is going to unveil industrial-grade storage products and embedded chips
Published Feb.25 2019,12:05 PM (GMT+8)
BIWIN will show customers a full range of storage solutions for mobile smart devices at the 2019 Embedded World conference, including eMMC, eMCP
【Market View】NAND Flash Giants Suffer Revenue Loss of 16.8% in 4Q18, Dragged Down by Falling Prices, Says TrendForce
Published Feb.21 2019,02:15 AM (GMT+8)
DRAMeXchange, a division of the global market research firm TrendForce, reports that the rising economic uncertainties caused some server manufacturers to delay restocking...
【Market View】Contract Prices of DRAM Products Projected to Drop by 15% QoQ in 2Q19 Due to High Inventory and Weak Demand, Says TrendForce
Published Feb.19 2019,14:14 PM (GMT+8)
The latest analysis from DRAMeXchange, a division of TrendForce, forecasts that the ongoing oversupply will result in significant price declines for DRAM products during 1H19...
【Market View】BIWIN’s Dedication to NAND Flash - for Memory Chip Localization of Domestic Mobile Phone Manufacturers
Published Feb.14 2019,05:30 AM (GMT+8)
On November 15, 2018, the 2nd Chongqing International Mobile Exhibition was ceremoniously held at the Chongqing (Nanping) International Convention & Exhibition Center, where the complete memory chip solution series of BIWIN were shown in the international exhibition - the complete embedded solution series were presented based on the subject of “BIWIN’s Memory - Oriented Solution&rd
【Market View】G.Skill Unveils Trident Z Royal Hexa-Channel 192 GB DDR4-4000 Kit for Xeon W-3175X
Published Jan.31 2019,02:41 AM (GMT+8)
G.Skill has released the industry’s first hexa-channel DDR4 memory kits designed specifically for Intel’s 28-core Xeon W-3175X processor for extreme workstations.
【Market View】Global Smartphone Market Cooling in 2019 with a YoY Decline of 10% in Production Volume, Says TrendForce
Published Jan.29 2019,14:29 PM (GMT+8)
TrendForce reports that the global smartphone production volume for 4Q18 totaled 383 million units, staying at a constant level from the previous quarter...
【Market View】Server DRAM Contract Prices to Fall by Over 20% QoQ in 1Q19 Due to Difficulties in Reducing Inventory, Says TrendForce
Published Jan.21 2019,14:11 PM (GMT+8)
https://www.theregister.co.uk/2019/03/07/dram_price_drop/
Personal Tech
God DRAM, that's a big price drop: Memory down 30 per cent, claim industry watchers
Plummeting chip prices are collateral damage from ongoing Intel CPU shortage
By Shaun Nichols in San Francisco 7 Mar 2019 at 20:46
26
SHARE ▼
The cost of DRAM chips has seen its largest decline in nearly eight years, as global prices fell by nearly 30 per cent.
This is according to DRAMeXchange, which estimated that so far this year, the price of contracts between DRAM suppliers and PC manufacturer took an even greater hit than the 25 per cent that had been forecast.
In addition to falling prices, suppliers such as Samsung and SK Hynix are seeing the contracts they have with computer vendors becoming shorter, with many opting to cut month-to-month deals instead of longer quarterly contracts.
The price decline builds on what was a lousy fourth quarter for DRAM suppliers. The end of the year saw global revenues for the industry tumble by 18.3 per cent as both price and shipments declined.
The blame for the decline is said to rest largely on the shoulders of Intel, which right now is bent on churning out high-end processors for servers to the detriment of its lower-end chips. That means PC makers are building fewer desktop machines because they can't get the Intel CPUs for them, which means fewer DRAM orders, which means stockpiles of desktop-grade RAM chips are building up in the warehouses of the semiconductor suppliers. And that's driving down prices: the supply of DRAM is outstripping demand.
We'll ask you one more time: Where's our DRAM money?
READ MORE
"According to the most recent market observations, inventory levels have kept climbing ever since overall contract prices dropped in the fourth quarter of last year, and most DRAM suppliers are currently holding around a whopping six weeks' worth of inventory (wafer banks included)," DRAMeXchange said in its research note this week.
"Meanwhile, Intel's low-end CPU supply shortage is expected to last until the end of 3Q19, and PC-OEMs are unable to carry out the consumption of DRAM chips under demand suppression."
The report notes that the major vendors, the trio of Samsung, SK Hynix, and Micron Memory Taiwan, should be able to take the hit in stride as they have the cash reserves to weather the storm. Smaller suppliers, however, stand to be hit particularly hard by the downturn and may never recover. Or, y'know, the PC makers could buy some AMD Ryzen parts.
"The rich stay rich — such is the immutable trend of the DRAM market; furthermore, new competitors are aided by a wealth of resources and capital upon entering the market," DRAMeXchange added. "Hence, if smaller DRAM suppliers don't find ways to catch up on production processes and scale, they may risk being marginalized in the near future." ®
Tips and corrections
26 Comments
DRAM Prices Are Falling Off a Cliff
Things are going very wrong for Micron.
Timothy Green
(TMFBargainBin)
Mar 6, 2019 at 8:19AM
So much for the muted downturn that Micron Technology's (NASDAQ:MU) management has been calling for. PC DRAM contract prices will be down a whopping 30% in the first quarter, according to analysis by DRAMeXchange. Inventory levels are still high, offering little hope of a reversal anytime soon.
How bad is the DRAM market right now? The first-quarter pricing decline is the worst since 2011. A shortage of low-end CPUs is exacerbating the problem, eliminating an avenue for demand growth. "The overall market has thus entered freefall, meaning that large reductions in prices aren't going to be effective in driving sales," according to DRAMeXchange.
In other words, about as bad as it gets.
Image source: Getty Images.
Investors may be in for a shock
Micron, which manufactures both DRAM and NAND memory chips, will report its fiscal second-quarter results on March 20. It already wasn't going to be pretty. The midpoint of Micron's guidance calls for revenue to drop by 18% compared to the prior-year period. Adjusted earnings per share are expected to tumble by 61%, the result of sluggish demand and prices dropping faster than Micron's per-bit costs.
Micron's results may come up short of its pessimistic guidance, but its outlook will pose the biggest problem for the stock. Shares of Micron have rallied this year, partly due to the hope that the company will turn the corner sooner rather than later. That now appears unlikely. Given the severity of the price declines in the DRAM market, this downturn could be just as bad as downturns of the past.
Analysts at Susquehanna are expecting Micron to whiff on its outlook. With chip pricing below expectations, analyst Mehdi Hosseini sees excess inventory keeping margins depressed through the second half of the year. Hosseini is neutral on the stock, but he expects Micron's outlook to come in far below the consensus.
Micron stock is not cheap
Shares of Micron look tantalizingly cheap. The stock trades for less than four times fiscal 2018 adjusted earnings and around 5.3 times the consensus analyst estimate for fiscal 2019 adjusted earnings. But that consensus estimate is almost certainly too optimistic. Exactly where Micron's earnings bottom out remains to be seen.
It could be squarely in positive territory if demand picks back up later this year, or it could be in negative territory if this downturn is like previous downturns. Micron posted net losses in fiscal 2009, 2012, and 2016.
MU Price to Tangible Book Value data by YCharts.
Relative to tangible book value, which is a useful metric to look at historically for a commodity manufacturer like Micron, the stock is still well above the lows it typically plumbs during downturns. Shares currently go for around 1.4 times tangible book; that ratio has bottomed out below 1 in each of the past two downturns.
This downturn in the DRAM market doesn't look "muted" or "dampened" at all. It looks like the worst downturn in a long time. Micron investors should brace themselves for a rough earnings report later this month.
Timothy Green has no position in any of the stocks mentioned. The Motley Fool has no position in any of the stocks mentioned. The Motley Fool has a disclosure policy.
https://www.digitimes.com/news/a20190116VL200.html
Fall in 1Q19 DRAM prices larger-than-expected, says DRAMeXchange
Jessie Shen, DIGITIMES, Taipei
Wednesday 16 January 2019
0
Toggle Dropdown
DRAM contract prices are set to fall nearly 20% sequentially in the first quarter of 2019, according to DRAMeXchange, which estimated previously a smaller 15% price decrease.
The article you are trying to open requires News database subscription. Please sign in if you wish to continue.
Login to continue
- NEW users please register first.
I forgot my ID and/or password?
- Related stories
- DRAM contract prices likely to fall nearly 30% in 1Q19, says DRAMeXchange (Mar 7)
- DRAM contract prices to fall another 15% in 2Q19, says DRAMeXchange (Feb 20)
- More flagship smartphones with 10GB or more RAM to hit store shelves in 2019 (Jan 22)
- Server DRAM contract prices to fall larger-than-expected, says DRAMeXchange (Jan 22)
- Server DRAM demand slowing down but outlook brisk (Jan 10)
- DRAM chipmakers to trim 2019 capex due to weak demand, says DRAMeXchange (Jan 7)
- DRAM, NAND flash prices to fall rapidly in 2019 (Dec 20)
- DRAM ASPs to fall over 10% in 1Q19, says DRAMeXchange (Dec 5)
- DRAM vendors remain focused on process technology transition (Nov 19)
Categories
https://www.dramexchange.com/WeeklyResearch/SectionPage.aspx
【Market View】G.SKILL Announces OC World Cup 2019 Competition
Published Mar.11 2019,13:59 PM (GMT+8)
G.SKILL International Enterprise Co., Ltd., the world's leading manufacturer of extreme performance memory and gaming peripherals, is excited to announce the 6th Annual OC World Cup 2019.
【Market View】First Quarter DRAM Contract Prices See a Rare, Large Down-Correction, Resulting in the Sharpest Decline Since 2011, Says TrendForce
Published Mar.05 2019,14:09 PM (GMT+8)
The latest analysis of the PC DRAM market from DRAMeXchange, a division of TrendForce, finds that most contracts are now monthly deals rather than quarterly deals...
【Market View】DRAM Revenue Took a Turn for the Worse in 4Q18; Suppliers Declining in Profitability, Says TrendForce
Published Feb.25 2019,14:17 PM (GMT+8)
Investigations by DRAMeXchange, a division of TrendForce, show that DRAM quotes have taken a turn for the worse in 4Q18...
【Market View】2019 Embedded World：BIWIN is going to unveil industrial-grade storage products and embedded chips
Published Feb.25 2019,12:05 PM (GMT+8)
BIWIN will show customers a full range of storage solutions for mobile smart devices at the 2019 Embedded World conference, including eMMC, eMCP
【Market View】NAND Flash Giants Suffer Revenue Loss of 16.8% in 4Q18, Dragged Down by Falling Prices, Says TrendForce
Published Feb.21 2019,02:15 AM (GMT+8)
DRAMeXchange, a division of the global market research firm TrendForce, reports that the rising economic uncertainties caused some server manufacturers to delay restocking...
【Market View】Contract Prices of DRAM Products Projected to Drop by 15% QoQ in 2Q19 Due to High Inventory and Weak Demand, Says TrendForce
Published Feb.19 2019,14:14 PM (GMT+8)
The latest analysis from DRAMeXchange, a division of TrendForce, forecasts that the ongoing oversupply will result in significant price declines for DRAM products during 1H19...
【Market View】BIWIN’s Dedication to NAND Flash - for Memory Chip Localization of Domestic Mobile Phone Manufacturers
Published Feb.14 2019,05:30 AM (GMT+8)
On November 15, 2018, the 2nd Chongqing International Mobile Exhibition was ceremoniously held at the Chongqing (Nanping) International Convention & Exhibition Center, where the complete memory chip solution series of BIWIN were shown in the international exhibition - the complete embedded solution series were presented based on the subject of “BIWIN’s Memory - Oriented Solution&rd
【Market View】G.Skill Unveils Trident Z Royal Hexa-Channel 192 GB DDR4-4000 Kit for Xeon W-3175X
Published Jan.31 2019,02:41 AM (GMT+8)
G.Skill has released the industry’s first hexa-channel DDR4 memory kits designed specifically for Intel’s 28-core Xeon W-3175X processor for extreme workstations.
【Market View】Global Smartphone Market Cooling in 2019 with a YoY Decline of 10% in Production Volume, Says TrendForce
Published Jan.29 2019,14:29 PM (GMT+8)
TrendForce reports that the global smartphone production volume for 4Q18 totaled 383 million units, staying at a constant level from the previous quarter...
【Market View】Server DRAM Contract Prices to Fall by Over 20% QoQ in 1Q19 Due to Difficulties in Reducing Inventory, Says TrendForce
Published Jan.21 2019,14:11 PM (GMT+8)
https://www.theregister.co.uk/2019/03/07/dram_price_drop/
Personal Tech
God DRAM, that's a big price drop: Memory down 30 per cent, claim industry watchers
Plummeting chip prices are collateral damage from ongoing Intel CPU shortage
By Shaun Nichols in San Francisco 7 Mar 2019 at 20:46
26
SHARE ▼The cost of DRAM chips has seen its largest decline in nearly eight years, as global prices fell by nearly 30 per cent.
This is according to DRAMeXchange, which estimated that so far this year, the price of contracts between DRAM suppliers and PC manufacturer took an even greater hit than the 25 per cent that had been forecast.
In addition to falling prices, suppliers such as Samsung and SK Hynix are seeing the contracts they have with computer vendors becoming shorter, with many opting to cut month-to-month deals instead of longer quarterly contracts.
The price decline builds on what was a lousy fourth quarter for DRAM suppliers. The end of the year saw global revenues for the industry tumble by 18.3 per cent as both price and shipments declined.
The blame for the decline is said to rest largely on the shoulders of Intel, which right now is bent on churning out high-end processors for servers to the detriment of its lower-end chips. That means PC makers are building fewer desktop machines because they can't get the Intel CPUs for them, which means fewer DRAM orders, which means stockpiles of desktop-grade RAM chips are building up in the warehouses of the semiconductor suppliers. And that's driving down prices: the supply of DRAM is outstripping demand.
We'll ask you one more time: Where's our DRAM money?READ MORE
"According to the most recent market observations, inventory levels have kept climbing ever since overall contract prices dropped in the fourth quarter of last year, and most DRAM suppliers are currently holding around a whopping six weeks' worth of inventory (wafer banks included)," DRAMeXchange said in its research note this week.
"Meanwhile, Intel's low-end CPU supply shortage is expected to last until the end of 3Q19, and PC-OEMs are unable to carry out the consumption of DRAM chips under demand suppression."
The report notes that the major vendors, the trio of Samsung, SK Hynix, and Micron Memory Taiwan, should be able to take the hit in stride as they have the cash reserves to weather the storm. Smaller suppliers, however, stand to be hit particularly hard by the downturn and may never recover. Or, y'know, the PC makers could buy some AMD Ryzen parts.
"The rich stay rich — such is the immutable trend of the DRAM market; furthermore, new competitors are aided by a wealth of resources and capital upon entering the market," DRAMeXchange added. "Hence, if smaller DRAM suppliers don't find ways to catch up on production processes and scale, they may risk being marginalized in the near future." ®
Tips and corrections
26 Comments
