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Memory chips expected to drop 40% this year, chip makers hit


The recent trend in memory prices has touched hearts of many people, and continuous downward trend has also hurt chip manufacturers. Cowen analyst Carl Ackerman predicts that average selling price of memory and flash memory chips will decline by 40% in 2019, while gross margins for memory chips will decline from 59% in first quarter of this year to 36% in fourth. quarter of this year, normalized in range of 36-37%.

Memory chips expected to drop 40% this year, chip makers hit

Memory chip sales are expected to fall by 40% this year, chip makers have been hit hard Samsung recently issued a warning message for its first quarter quarterly financial report, indicating that quarterly revenue for first quarter of this year is about 52 trillion. won, and operating income is 62,000 billion won, and profit fell 60% year on year. The sharp drop in Samsung's profits is attributed to its memory chip and OLED screen business, mainly due to declining memory prices. Memory is expected to fall by up to 30% in first quarter, which will seriously affect memory chip companies .

Besides Samsung, Micron is not insured either. Recently, Morgan Stanley, Cowen and others downgraded Micron's rating and share price target. The reason is that stock of memory chips is still too large, and Micron's profit will be significantly reduced. Mikron's share price has been falling for past few days, yesterday it fell by 2.75%.

After JPMorgan Chase downgraded Micron's stock, Cowen analyst Carl Ackerman also downgraded Micron's stock and lowered its share price target from $46 to $45 on grounds that competitive market conditions are undergoing fundamental changes. 3D NAND flash is being diluted, and lower DRAM prices will also hurt Micron's profits in 2020.

In Carl Ackerman's report, in addition to impact of price cuts on memory, he also mentioned an issue with Micron 3D NAND flash memory. He believes their cost advantage will be eroded in 2020, causing Micron 3D NAND flash to fall behind. This would limit company's ability to offset price fluctuations due to imbalances in supply and demand.

For future, while memory chip companies such as Micron expect memory chip market to recover in second half of this year (Q4 at latest), results of Carl Ackerman survey are not as optimistic. He studied experiences of memory and flash 7 industry cycles and supply chain conditions, it is believed that this bottom will last for several quarters, and price increases for NAND flash and DRAM memory will not appear until first quarter of 2020. .