Memory stores what has happened in the past, but can’t tell you what will happen in the future. It seems the same is true of memory companies.
Memory chips usually make up the biggest volume of semiconductors on a single electronic device, and they are as important as the brain chips — while microprocessor chips are seen as the brains for electronics, the memory chips store the data and interact with the brains.
After a shortage of chips slammed tech companies late in 2017, customers went on an unprecedented buying spree at high prices in 2018 to ensure their gadgets and data centers would have what they needed. Memory was the largest category of the semiconductor market, accounting for $158 billion of the $469 billion in total chip sales in 2018, a jump of 13.7% from 2017.
At the time, memory manufacturers like Micron Technology Inc. MU, -5.18%[1] repeatedly preached that it was a new demand environment for memory chips, not a cycle. As it turned out, it was a cycle, and we are now in a severe downturn: According to the latest data from the Semiconductor Industry Association, worldwide chip sales tumbled 14.5% in the first half of 2019, with memory being the biggest culprit.
Now, the biggest question for memory manufacturers — and possibly the entire semiconductor industry — is when the downturn will end. Halfway through earnings season, we have received a lot of guesses that the downturn will end this year, but there also have been mixed signals.
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Unsurprisingly, one of the most optimistic outlooks for memory came from, you guessed it, Micron, one of the top four memory-chip makers in the world. Micron’s top executives hinted that the worst is already behind them.
“At some point we knew they’d run out of inventory and they would need to order. And this appears to be the quarter in which that’s happening,” Micron Chief Financial Officer David Zinsner said in late June. While there won’t be another big update for investors until late September on Micron’s financial results, Zinsner spoke earlier this week at a KeyBanc Financial Markets technology conference, still sounding optimistic about inventory usage by Micron customers and demand.
“What’s helping us is, demand has come back and we’re starting to see the inventory digestion that we saw at the customers in the cloud space, in graphics,” he said, according to a transcript. “Looking forward, we’re actually seeing pockets of tight supply with some of our customers, with certain with our DRAM and NAND products. So, that’s something, I think that’s interesting to note right now. Of course we remain cautious,” he said, adding that Micron is going to very carefully...