Fears of a downturn in memory chips such as DRAM and NAND are ill-founded, argues Romit Shah of Instinet, as the raging demand for parts in cloud computing and artificial intelligence should continue to boost sales for Micron, as well as for its equipment suppliers, Lam Research, Applied Materials, and KLA-Tencor.
@Instinet analyst @RomitShah today reiterates Buy ratings on @Micron Technology (MU), and the chip equipment makers that help it, @Applied Materials (AMAT) and @Lam Research (LRCX), writing that investors still underestimate how strong the trend is in #DRAM and #NAND flash chips, which have become the “choke point” of all computing.
Cloud computing companies are gobbling up both NAND and DRAM to speed up their efforts, as memory has become the critical part, writes Shah:
DRAM and NAND storage have become the choke point in system level performance across multiple applications; cloud vendors, for example, are boosting memory content to speed up performance. These cloud companies are very sophisticated about hardware architecture. Vendors are spending tremendous amounts of capital to reduce wait times in servers. This means maximizing the amount of memory around the processor and greater use of NAND flash.
Chip supply is exacerbating the situation, writes Shah, as indicated by remarks from Micron CEO @SanjayJah:
Chip supply is exacerbating the situation, writes Shah, as indicated by remarks from Micron CEO @SanjayJah:
According to commentary by Lam mgmt., 3x the capex is required to achieve the same level of DRAM bit growth today as in 2012; 5x the capex is needed in NAND. Along these lines, although DRAM WFE spend is estimated to come in at $13bn in CY18 (flat vs. CY07), that level of investment would only generate 20% bit growth vs. 90% bit growth a decade ago. Similarly, NAND WFE is estimated at $15bn in CY18, up 2.5x vs. $6bn in CY07; however, that level of investment would only yield 45% bit growth vs. 125% bit growth 10 years ago. The factor worth noting is that the memory market is more diversified. Demand drivers for both DRAM and NAND are far more balanced today than they were in 2007. A decade ago, demand for PC DRAM was 7x server DRAM; demand for mobile NAND flash was 10x SSD NAND. In 2018, demand for server DRAM is 2x PC DRAM while demand for enterprise SSDs exceeds that of mobile NAND flash.
Best of all, the high demand and tight supply is translating into much higher prices for the chips, he notes, including DRAM but also other chips such as the "graphics processing units,” or GPUs, sold by Nvidia (NVDA).
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