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October 28, 2019

Chart of the Day: Are Memory Prices About to Recover?

by David Aurelio.

Memory prices may be on the cusp of a 2020 rebound. When the Philadelphia Semiconductor Index (.SOX) is on the rise while forward P/E ratios for the global leaders in DRAM memory production, Samsung Electrons Co Ltd (005930.KS), SK Hynix Inc (000660.KS), and Micron Technologies (MU.O), start to decline, an increase in memory prices, as measured by the DRAMeXchange – DXI Index, often follows.

According to memory equipment supplier Timothy M. Archer, Lam Research Corporation – President, CEO & Director, NAND memory prices could stabilize or improve by the first half of 2020 and that DRAM would follow in the second half of 2020. “We are beginning to see improvement in the memory market, led first by NAND. NAND demand dynamics are improving and oversupply conditions should continue to abate as we move through the December quarter. We expect to exit 2019 with a bit supply growth rate for NAND of approximately 30%, which is well below our view on long-term demand. And as a result, NAND inventories are expected to decline to normalize levels in the first half of calendar 2020.” He went on to say, “On the DRAM front, inventories have remained elevated and we do not expect them to reach normalize levels until the second half of 2020. However, we see positive demand catalyst ahead in both the server and smartphone markets. Our server CPU upgrade cycle is expected to begin next year with increased adoption of new generation platforms from leading manufacturers. For smartphones, major vendors are planning to launch additional 5G models, which are expected to drive content growth for the overall smartphone market in 2020.”

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