Spending by NAND customers was similar to last quarter, both historically low, reflecting the depth of the downturn in that memory type. Spending by DRAM customers was unexpectedly strong at $1.32B. This is higher than any quarter going back to the end of 2017. Last quarter was $795M. An outlier like this makes me think it is the result of a one-time pull-in of sales or a recategorization of some spending. They see both pricing and utilization improving for their DRAM customers. NAND is weak and will continue to be weak. For 2024, they see NAND WFE spending up from the low level of 2023 but still far below what was spent in 2022. The high DRAM spending in the quarter was explained in the conference call to be largely from Chinese customers buying equipment for trailing-edge DRAM processes. This was almost $500M in revenue for the period. The company forecasts continued strength in Chinese trailing-edge DRAM continuing into Q1 of 2024. After Q1, these elevated Chinese DRAM sales will subside. The executives put a positive spin on DRAM demand for 2024 but didn’t go as far as to make any concrete forecasts. My conclusion from their comments is the DRAM market – outside Chinese customers buying old technology – continues to be weak and Applied won’t venture a guess as to when it will recover. As I mentioned above, they are seeing indications that the DRAM market has started to turn up, but there is a delay of indeterminate length between when memory prices start to recover and when DRAM makers increase their WFE purchases. As a memory company shareholder, I want this delay to be as long as possible.
-S. Hughes (cyclical long MU)