Memory chips are an essential component in almost every electronic device, making pricing trends for these semiconductors a crucial indicator of overall demand. Recent developments suggest a rebound in memory chip prices, pointing to potential shifts in the chip industry.
According to Susquehanna analyst Mehdi Hosseini, recent conversations with industry contacts reveal that average dynamic random-access memory (DRAM) prices may experience a steeper decline than anticipated. Previously, Hosseini projected a 3% drop in DRAM prices for the September quarter, but now it appears that prices may fall by 5% quarter-over-quarter.
DRAM is commonly used in desktop computers, smartphones, and servers, making it a vital component in the electronics market.
Hosseini’s observation of weaker-than-expected memory chip prices is concerning. He states that recent data suggests “no confidence in a meaningful recovery into the first half of 2024.” This insight prompts the need to reconsider projections for the industry.
Despite these developments, Micron Technology stock (ticker: MU) remains relatively unchanged, currently trading at $63.58. Hosseini maintains a Positive rating on Micron, one of the leading sellers of memory chips, and does not anticipate any changes to his estimates for the company. Year-to-date, Micron stock has seen a solid 27% increase.
Hosseini points out that memory inventories at chip manufacturers are not decreasing as rapidly as anticipated. This slower reduction in inventory levels implies a potential “excess inventory” problem that could extend into the first half of next year. Additionally, pricing negotiations for deliveries expected during the December quarter are proving to be worse than expected.
The current assumption for industry financial estimates is that prices will rise early next year. However, Hosseini’s recent observations raise concerns about manufacturers’ ability to achieve significant price increases during the first half of 2024.
If the weakness in memory chip prices persists, there is an unavoidable possibility of delaying the anticipated upturn in the industry.