Nanny Q1-22 Financial Results

April 11, 2022

About the Company

Nanya is a small Taiwanese DRAM manufacturer. They produce DRAM on trailing-edge process nodes (licensed from Micron) but are developing their own more advanced, technology. Nanya has about a 3% share of the DRAM market, a distant fifth, behind Samsung, Hynix, and Micron. The top three companies control a combined 95% of the DRAM market.

I don’t own any shares of Nanya and would not buy any, because they lack the scale and the technology to be competitive in DRAM. I keep an eye on their quarterly releases as a data point on the DRAM market. The link to their Q1 2021 earnings release slides is at the bottom of this post.

Market Commentary and Q1 2022 Performance

Revenue in the first quarter declined 6.8%. Most of this came from a mid-single digits % decline in ASPs (was down low-single digits % last quarter). Bit shipments decreased 1.0% after being down mid-single digits in the previous quarter. The decline in pricing had a large impact on gross margins; they declined 550 bps sequentially, to 43.9%. This is the second quarter of declining DRAM ASPs for Nanya, following three quarters of gains. If this is the end of the upturn in memory prices, it was the shortest one in history. This low bit growth means Nanya is losing bit share in the DRAM market.

Bit Shipments and Capital Expenditures

Nanya’s forecast for bit growth in 2022 is unchanged from three months ago. They are not planning to grow bits during the year. However, CapEx in 2022 is estimated at $1B. This is more than the last three years combined CapEx. Most notable in this release is the company announcement that construction of their new memory fab would be delayed for more than six months, and production will not start until 2025 at the earliest. The company president ci9ted longer than expected time to get regulatory and environmental reviews and approvals completed.

Q2 and Full Year 2022 Market Outlook

Cloud demand continues to be strong and consumer “remains healthy.” Smartphone and PC is soft because of seasonality and global uncertainty. They expect component shortages to ease in the second half of calendar 2022. The Ukraine war, inflation, and lockdowns in China are risks that hang over demand for the year. DRAM supplier inventories remain low. Overall, they see the market relatively balanced. The trend for pricing in Q2 is either to be relatively flat or marginally down.
Server Market: Datacenter leading demand growth and DDR5 shipment start 2H’22
Mobile Market: 5G models penetration growing, and average DRAM content increasing, however shipment momentum tapering
PC Market: Enterprise and gaming demand remain solid, while consumer demand soften
Consumer Market: Positive outlook for networking, wearables, and smart home devices. Automotive still dragged by supply chain issue


If this were a pre-COVID DRAM market, I would say this quarter clearly indicates the upturn is over. There have been two quarters of declining memory prices, albeit shallow declines. But this is not a normal cycle and my confidence in my predictive powers is low. Nanya is not contributing to supply; they will undergrow the market by a lot in 2022. Their commentary that supplier inventories are low is also encouraging. Nanya said something similar to Micron, that cloud/data center demand is the driver of the DRAM market there, and this segment remains strong. It is the consumer and PC markets that are causing uncertainty. This weakness is why the DRAM spot market has been declining for several weeks. It is also why Nanya’s results were hit harder than Micron’s. Nanya has much more exposure to PC DRAM pricing. As a Micron investor I came away from these results feeling a little worse. The declines we’ve seen in the spot market translated into a larger decline in Nanya’s income than I thought would be seen. But they said the right things about the rest of the year. Nobody knows what will happen in the memory market but at least management said they see the market being “balanced” rather than going into oversupply. I am optimistic about the rest of 2022 for DRAM but it is a contrary view with Micron’s stock price down in the low $70s and spot pricing in the red for several weeks.

Link to earnings presentation:…

-Smooth Hughes (long MU)

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