Five weeks after Micron (MU) delivered better-than-feared numbers, a pair of rival memory makers have provided guidance and commentary that suggests memory markets are approaching a bottom, and so has one major chip equipment maker.
On Tuesday evening, Samsung (SSNLF) , the world's biggest DRAM and NAND flash memory maker, reported that its memory sales fell 34% annually in Q2, as tumbling prices and soft end-market demand continued to weigh. However, it continued to forecast full-year DRAM and NAND industry bit demand would grow by a mid-teens percentage and a low-30s percentage, respectively, as demand improves during the back half of the year.
That outlook isn't too different from Micron's. In late June, Micron guided for DRAM bit demand to rise by a mid-teens percentage this year, and for bit supply to rise by a mid-to-high teens percentage. NAND demand was forecast to rise by a mid-30s percentage, with supply rising by a high-30s percentage.
Notably, Samsung also suggested that lower NAND prices are boosting memory capacities for phones and solid-state drives (SSDs), and that NAND channel inventories have fallen significantly. For DRAM, the company noted that smartphone DRAM capacities continue rising, and that -- following a recent cloud capital spending pause and inventory-digestion period -- data center clients "started to resume purchasing" late in Q2.
Meanwhile, NAND and hard drive giant Western Digital (WDC) rose 3% on Thursday after reporting roughly in-line June quarter results and also issuing in-line September quarter sales guidance (better than feared). On its call, Western noted that (with the help of price declines) its average capacity for client (PC) SSDs rose 50% annually, and that its flash business is "seeing a more stable pricing environment" as it enters a seasonally stronger part of the year.
For its part, chip equipment maker Lam Research (LRCX) said on its Wednesday earnings call that its outlook for 2019 memory industry capital spending -- already expected to be down sharply relative to 2018 -- is weaker than it was three months ago, and that (following Taiwan Semiconductor's (TSM) recent capex budget hike) its outlook for spending by foundries (chip contract manufacturers) is now stronger. Overall, Lam sees these two issues cancelling out, and is maintaining its guidance for 2019 wafer fab equipment (WFE) spend to drop by a mid-to-high teens percentage.
While Lam's revised memory capex outlook is a near-term negative for chip equipment firms, it's another sign that memory supply growth is falling sharply as DRAM and NAND makers respond to their industry's downturn by slashing capex. Notably, Lam added that it expects annual bit supply growth for both DRAM and NAND to exit 2019 "well below the long-term demand trend lines," and that this will create "a favorable setup" for memory capex as 2020 arrives.
The memory industry still has its share of negative news to contend with. While NAND prices are showing signs of stabilizing, DRAM prices are for now still dropping -- Apple's (AAPL) seasonal iPhone production ramp and improved cloud spending might soon provide a lift, but we'll have to wait and see. In addition, last week, fellow Korean memory giant SK Hynix provided a slightly more cautious view of DRAM demand than Samsung, noting trade uncertainty and soft demand from enterprise server makers are still weighing. And certainly, the new 10% tariff that President Trump just announced for $300 billion worth of Chinese imports doesn't serve to lower the impact of trade uncertainty on chip buying patterns.But at a time when firms like Micron and Western Digital trade for less than 4 times the peak earnings they achieved during the memory industry's latest boom cycle, and also for less than 10 times what they're expected to earn (following major estimate cuts) during their 2021 fiscal years, the guidance and commentary that has been shared so far this earnings season is on the whole encouraging for memory makers.