2Q/2019: Memory business is approaching bottom

Megatrends are of course still present in this competitive landscape. The automotive sector is for example playing a key role. Even if the automotive memory business was still a relatively small market segment with less than 3% of the overall stand-alone memory market in 2018, companies are seriously considering investments and developments in this industry sector. Therefore, driven by important technology trends, automotive is expected to be the fastest growing memory-market segment over the next 5 years. Some memory analysts announce more than 20% CAGR between 2018 and 2024. Autonomous vehicles are radically changing the memory requirements. By 2024, the average NAND content in cars is expected to increase dramatically, exceeding 300 GB/vehicle. Yole forecasts an impressive 79% CAGR between 2018 and 2024. Over the same period, DRAM should reach a 42% CAGR from 3.2GB per vehicle today to nearly 20GB per vehicle. NAND market: the worst will soon be behind you “NAND market conditions remained soft in 2Q/2019, with seasonally weak demand and abnormally high inventories keeping the pricing environment under downward pressure”, announces Walt Coon, VP of NAND and Memory Research and part of the Semiconductor & Software division at Yole. Quarterly revenue stood at USD 10.1 billion in 2Q/2019, down slightly from Q1-19 and down 35% year-over-year. Blended NAND prices fell 13% from Q1-19, the sixth consecutive quarter of sequential price declines. Bit shipments were up 14% in the quarter. NAND revenue-based market share rankings changed slightly in Q2 2019:

• Samsung increased its market share leadership position to 37% of the total revenue, up 5 points from Q1 2019
• Toshiba Memory held the second position with 19% of total revenue, followed by Western Digital at 14%
• SK hynix market share was 11%, overtaking Micron at 10% for the 3rd position; Micron at 10% for the 4th position

Intel accounted for 8% of industry revenue, while the remaining players accounted for less than 1% of NAND industry revenue. Intel accounted for 8% of industry revenue, while the remaining players accounted for less than 1% of NAND industry revenue. Although NAND inventory remains elevated, several suppliers were able to reduce inventory levels in the quarter. The power outage at Toshiba Memory’s Yokkaichi facility late in the second quarter will reduce industry production, helping to accelerate inventory declines. Normalising inventory levels, rising seasonal demand, and impacts from prior utilisation and capex cuts provide hope for a likely recovery in the second half of 2019 and an improved 2020 outlook. The DRAM market: winter has come The DRAM market continued to decline in 2Q/2019. Quarterly revenue fell 11.4% in 2Q/2019, to USD 15.3 billion. Prices fell 20.7% during the quarter, marking three consecutive quarters that prices have fallen. Revenue would have fallen much more had shipments not grown 16.3% for the quarter. The strong growth in shipments was in stark contrast to 1Q/2019 when shipments fell 3%. The market shares of the DRAM triumvirate (Samsung, SK hynix, and Micron) remained largely unchanged in 2Q/ 2019 although Samsung did pick up 2% of market share while SK hynix and Micron each surrendered 1%. Given the capital expenditure plans for 2019 and 2020 we do not expect significant shifts in manufacturing market share this year. “While we still anticipate several more quarters with falling prices, the recovery is coming into clearer focus”, details Mike Howard, VP of DRAM & Memory Research at Yole. “Prices are expected to fall 45% in 2019 and continue falling in early 2020 before prices begin climbing in mid-2020.”