The Six Five team discusses memory market: call it a comeback.
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Transcript:
Daniel Newman: All right, Pat, let’s talk about something. You and I had a couple of Six Five on the road at CES. We talked to Micron, but we also had some conversations with Samsung Semiconductors and some of the other players. And one of the things, Pat, that all of this AI, it doesn’t really matter if it’s AI on the PC or AI in the data center, is going to spur is a comeback for memory. And so we talk a lot about compute. And I think that’s kind of like in any stack, compute gets a lot of talk and then network and storage are kind like, yeah, we need some of that too.
And so sometimes it doesn’t get talked about. But here’s the thing, Pat, you and I have said this on the record quite a few times, nothing happens without memory. And in fact, whether it’s accelerated computing, whether it’s acceleration on a CPU, in order to do all this inferencing, being able to get enough in-memory performance, it’s going to be critical. And so you and I kind of brought this question up when we were talking to some of the folks at Micron, in fact some of the folks at some of the other PC makers is, have we come back and found ourselves in a moment where memory is going to, A, find the RAM? And this is going to be, of course, D-RAM and multilayered NAN technology, integrated memory is going to be very important. And are the companies in that particular space about to get some pricing power back?
And you haven’t been following the last 8, 10 quarters. Memory has been brutal. You got to look at the losses that have been endured by memory companies. I think Samsung had a quarter where their profits dropped like 90%, and it was tied to basically all their businesses at once sitting the trendline to go the wrong way. I mean, Micron went from making billions to losing billions. And it was really right in line with this kind of boom, bust cycle. But absolutely happened, and it was a very challenging moment for these companies. But right now, are they sitting there kind of doing their best Mr. Burns thing, kind of tapping their fingers and going, “Let’s see what happens without memory?”
Patrick Moorhead: So good, Dan.
Daniel Newman: And have we found this inflection, Pat, right now? If you’re a betting person, and we’re not talking about markets, not suggesting any stocks, but we are saying if you are a betting person, you are looking at markets and you’re kind of saying, what other companies involved in this AI boom maybe haven’t gotten a lot of attention? Is memory where it’s at? And I think the answer to this could be, yeah. What do you think?
Patrick Moorhead: So there are some things you can bet on, like your watch. And that’s that the memory and the storage market will go through booms and bust cycles, and nobody is satisfied with what is going on, ever. Because in the boom cycles, you can’t get enough. And my gosh, why didn’t these memory companies do good enough supply chain planning? When they’re investing $20 billion into something that they need during the down cycles, they need to pause, but they’re still paying on the CapEx for this investment in negative gross margins. So both SK Hynix and Micron had negative gross margins. Not profit, not operating profit, gross margin. And that is always disturbing. But why was Micron up significantly in 2023 with negative gross margins? Because people, thankfully understand history and that there’s boom and bust, and that we are going to get back in there.
What prompted my analysis of this, and check it out in the show notes was, reports coming out, rumors, about both Micron and Samsung increasing prices 15% to 20% in the first quarter of ’24. And I do believe that this is the beginning of the comeback. Now, SK Hynix is gross margin neutral, and Micron guided to that point. So everything to me says we’re about to see the comeback. But we’re going to start seeing the money printing presses are going to be hit probably in the fourth quarter. I mean, if we see a nominal jump in smartphones, nominal jump in PCs or the non-AI enterprise, you’re going to see prices go up, people can’t get memory, prices will go up even more, and then we’re going to start going through this cycle and it’ll probably be an 18-month to a 24-month super cycle in this. But if you want more information on it, I pulled financial information from Hynix, Samsung, and Micron, if you want to take a look for yourself.
Daniel Newman: Yeah, follow the brilliance of none other than Patrick H. Moorhead. Is it H?
Patrick Moorhead: I don’t know. We just need to turn on CNBC whenever, and you’re going to be on there talking about this stuff. So I got to make up for it somehow, my friend.
Daniel Newman: No, I mean look, the memory space has players that have been starved. They’ve absolutely been starved for this period of time. I mean, everything got pre-bought. Supply chains, they literally sold through everything they had. The panic that was created by that supply chain shortage created this lust for every bit of silicon and memory that would be available as if the boom would never end, as if the music would never stop. And then basically, what happened is one day it stopped, then it was like-
Patrick Moorhead: People are paying 25% what they were paying two years ago for the same density of memory.
Daniel Newman: I mean, unbelievable. So the moral of the story, by the way, people are paying 50% on cars, 50% of the price that they were paying. I mean, people were buying trucks for twice retail. That’s inflation, people. Just understand that this is where it happened. It was these exact things. And that’s also why some of the LTAs started taking place with some of these foundries. You saw some of them really picking up their long-term agreement investments, was like, we’re going to be the companies that start to steady the hand of the ship, which means there will be less boom, but there will be less bust because you guarantee capacity. And knowing that, it just is such the human condition. Because we know emphatically what’s going to happen. And it’s like you could have turned the music on. I would say your watch is right twice a day, broken watch is right twice a day. I just never set the time on that watch.
Patrick Moorhead: Forgot about that one.
Daniel Newman: I was laughing when you said that because I’m like, my watch is completely unpredictable.
Author Information
Daniel is the CEO of The Futurum Group. Living his life at the intersection of people and technology, Daniel works with the world’s largest technology brands exploring Digital Transformation and how it is influencing the enterprise.
From the leading edge of AI to global technology policy, Daniel makes the connections between business, people and tech that are required for companies to benefit most from their technology investments. Daniel is a top 5 globally ranked industry analyst and his ideas are regularly cited or shared in television appearances by CNBC, Bloomberg, Wall Street Journal and hundreds of other sites around the world.
A 7x Best-Selling Author including his most recent book “Human/Machine.” Daniel is also a Forbes and MarketWatch (Dow Jones) contributor.
An MBA and Former Graduate Adjunct Faculty, Daniel is an Austin Texas transplant after 40 years in Chicago. His speaking takes him around the world each year as he shares his vision of the role technology will play in our future.
