Capital Spending

Toshiba to Cut NAND Production by 30%

Toshiba's Fab 5 in YokkaichiIn a surprise announcement Toshiba has said that it will immediately cut NAND flash production by approximately 30%.  The company explains that this is being done “to reduce inventory in the market and improve the overall balance between supply and demand.”  Toshiba’s release implies that this move is expected to improve prices, which have dropped as low as $0.31/GB recently.

By common measures of market share, which typically leave out SanDisk (for reasons too complex to discuss here) Toshiba holds a share of roughly 30% of the NAND flash market.  By cutting its output by 30% Toshiba would be reducing overall NAND supply by 10%.  If we were to include SanDisk, then that percentage would decrease to about 7.5%.  Either one of these is significantly more than Continue reading

Why DRAMs are Like Steel

The McKinsey Consulting Steel ModelOver lunch today I had a conversation with an alum of McKinsey Consulting who remarked that the DRAM business behaved in a way that was similar to the McKinsey Steel Model.  For those unfamiliar with this model I found a slideshow HERE that refers to it a good deal.  (So far I have not found a tutorial on the model itself, but if anyone knows were to find it The Memory Guy would highly appreciate hearing about it.)

One interesting thing is that this particular McKinsey alum was not the first to point this out to me.  About 15 years ago a family friend/McKinsey alum told me exactly the same thing.  It seems that the economics of the DRAM business have changed little over the past 15 years, and the McKinsey steel model applies to DRAMs just as well now as it did then.

In a nutshell, the model posits that the market price for Continue reading

DRAM Consolidation in 2012?

History of DRAM Market Share by Company2012 is likely to be a year in which the DRAM market consolidates a little bit more.

Consider this:

  • At its peak in the late 1980s the DRAM market sported 23 suppliers.
  • Today there are 6 suppliers of any note: Samsung, Hynix, Micron, Elpida, Nanya, and Powerchip
  • The already-depressed market is only going to worsen in 2012.  Capital spending in 2010 is seeing to that.  Although many believe that prices cannot get any lower, that is exactly what they will do in 2012. Continue reading