Over 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 “Why DRAMs are Like Steel”
Elpida today filed for bankruptcy. The troubled DRAM manufacturer has been unprofitable for the past five quarters and was facing repayment requirements that the current market would prevent the company from meeting.
The company is the world’s third largest DRAM maker, and is the last remaining Japanese DRAM company. This is particularly stunning for DRAM industry veterans, since Japanese DRAM makers were at one time the largest in the world. NEC used to be the world’s largest semiconductor manufacturer based largely upon its DRAM revenues.
Objective Analysis has issued an Alert covering this news. It can be downloaded for free from the Objective Analysis Reports page.
For months rumors have abounded regarding Elpida’s viability and plans the company has to overcome its current financial woes. Although the company has been questioned about advanced payments and loans from its customers, takeover and merger possibilities, and even government intervention, Elpida has remained silent, refusing to comment.
Today the company finally made a statement that it will be adding a note to its Q3 results and earnings report: “on Matters concerning the Assumed Going Concern.”
This statement, which looks like it was written very carefully by either Continue reading “Elpida Finally Makes Statement”