Is the Memory Business Turning Around?

Cartoon face spelling "memory" with an upturn arrow for a smileThe memory business is giving indications of improved health, and The Memory Guy thought that it might be a good idea to share some insights normally reserved for Objective Analysis’ paying clients.

Let’s have a look at what we know so far.

DRAM and NAND flash spot prices are slightly up.  This appears in our standard spot pricing chart, which illustrates the lowest spot price per gigabyte of DRAM and NAND flash of any type except for “Effectively Tested” chips (also called “Unbranded” or “White”). This approach eliminates questions about density shifts over time.

Chart with two lines for NAND and DRAM spot prices. Both curl up in recent weeks, after a dramatic drop in the middle of 2022.This by itself is very encouraging, but don’t expect for prices to come back up to early-2022 levels, or anywhere close to that.  Objective Analysis clients are well aware that supply/demand balances and even shortages do not typically cause price rises.  Instead, prices can be expected to remain mostly level.

Today we are somewhere close to what many would call a “New Normal.”  Still, revenues can rebound, and lost profit margins can be re-established if prices remain stable while DRAM and NAND makers continue to drive production costs down through process shrinks and layer count increases.

Some readers might be alarmed at these prices.  The spot market does not represent what’s going on in the contract market, and during an oversupply like today’s spot prices will always be much lower than contract prices.  The following chart provides graphic evidence of that.  It compares lowest spot market prices to average prices (typically >90% contract prices) for the NAND flash market.Chart with two pricing lines with monthly data from 2019-2022. A Contract price line remains above the spot line for the bulk of the chart, except during early 2017.

Note that spot prices tend to move more dramatically and earlier than contract prices.  Many people regard spot prices as a leading indicator of where contract prices are headed, and the chart above shows that that is often the case.

The recent spot price increase for NAND flash and DRAM appears to indicate that the toughest part of the downturn is over.

Other indications show that the semiconductor market is returning to health as a whole.  This chart shows WSTS total monthly semiconductor revenues through last August.  It is plotted against a straight 3.9% annual growth trend line which the actual revenues closely follow except during the stunning booms of 2018 and 2022, and the meltdown in 2009 after the Global Financial Collapse .

Semi-Log chart of monthly semiconductor revenues, compared to a constant growth of 3.9%. The actual revenues closely follow the 3.9% growth line except during times of extreme change, including 2009, 2018, and 2022. The most recent 6 months appear to be copying the beginning of the 2018 and 2022 bubbles.

For the last six months this market has experienced an upturn, indicating that demand is coming back to healthy levels.  If that upturn followed the black dashed line all would be good, since this would indicate that it was returning to the healthy 3.9% average growth level that the market has closely followed since 1996.

Instead, revenues seem to be following the pattern of the 2018 and 2022 spikes the chart so clearly illustrates, and this could mean that we’ll have another “Boom-Bust” cycle with a sizeable downturn in 2025.  Let’s hope that doesn’t happen again, because the memory market is always the hardest hit of all the semiconductor markets.

A lot more could be said about this data and these charts, and we can use them to build a forecast.  My company Objective Analysis does just that for our clients, and if you’re not already a client of ours we would love to have an opportunity to chat with you to explore ways that we can help your company exceed its fiscal goals.  Give us a call to find out how we can help your company out-perform the market.