Analyst: Expect Micron, DRAM market recovery in 2H 2019

Micron predicts rebound for chip market in 2019
Image: Micron Technology

From its latest quarterly earnings, Micron Technology expects a memory chip market recovery as soon as late 2019. Outside sources are now corroborating this forecast with analysis of the company’s demand drivers.

Cloud Computing Spend may Boost DRAM

In a recent Seeking Alpha article, analyst Robert Castellano posited that cloud computing industry growth expectations later in the year should fuel DRAM memory chip demand.

Castellano quoted Amy Hood, EVP and CFO of Microsoft, from the company’s April earnings call. Hood spoke on Microsoft’s cloud capital expenditure projections for the year.

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“[On] CapEx, our full year outlook remains unchanged. Therefore, we expect a sequential dollar increase in capital expenditures in Q4 as we continue to invest to meet growing customer demand”

DRAM Recovery’s Timing in Focus

Industry analysts generally agree about a late 2019 DRAM recovery, but the precise timing of this recovery is a topic of uncertainty.

Kinngai Chan of Summit Insights told Reuters that investors are looking to Q3 to mark a bottom for Micron’s near-term sales and gross margin. However, Micron Technology CEO Sanjay Mehrotra anticipated Q3 to be a time of rebound, rather than bottoming-out, in the company’s 2Q earnings call in March.

Despite the Q2 seeing customer inventory levels rise, weaker server technology demands, and CPU shortages at select OEMs, Mehrotra voiced optimism about Q3.

“[A]s we discussed on our last earnings call, we still expect DRAM bit shipments to begin increasing in our fiscal Q3, with demand growth strengthening in the second half of calendar 2019 as most customer inventories are likely to normalize by mid-year.” Mehrotra said.

The company’s optimistic Q3 forecast may depend upon news about the ongoing US-China trade conflict. In the call, Mehrotra alluded to the trade conflict to explain part of the price depression in DRAM.

A March DRAMeXchange article found mobile DRAM to be in better condition than other end markets, but with a caveat that overall declines in mobile should still keep mobile DRAM contract prices low through at least Q3 2019.