Nanya Q1 2024 Earnings

April 10, 2024

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 94% 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.

Market Commentary and Q1 2024 Performance

With the strength of Micron’s results last month, I thought Nanya’s first quarter would be better. It wasn’t bad, just not the sharp recovery in DRAM pricing and bit shipments I was expecting. I believe the DRAM market is tipping into undersupply now and I thought it would be more evident here. Revenue in the quarter rose 9.2% with gross margin improving 10,700 bps, from (13.6)% to (2.9)%. This isn’t good enough to bring back the historical gross margin graph, marking the fifth quarter since they stopped showing that chart. Nanya saw ASPs increase high-single digit % in the first quarter and bit shipments were up low-single digit %. For the last nine quarters, going back from Q1-24 (from newest to oldest), ASP changes have been: up high-single digits %, up low-single digits, down high-single digits, down mid-single digits, down mid-single digits, down high-single digits %, down mid-20s%, down low-20s%, down mid-single digits %, down mid-single digits %. It feels like the upturn has been underway longer, yet these results show it is only the second consecutive quarter of expanding gross margin for Nanya. The turn up in pricing has not been as sharp as I thought it would be. This could be the inventory shock absorber effect I described in my Q4-23 Nanya post. When the DRAM market recovers, the early quarters are typically the strongest. Therefore, I expect the rest of the quarters in 2024 for Nanya to show double-digit-% ASP gains. My midpoint forecast for the next three quarters is ASPs up mid-teens %, up 20%, and up high-teens %. The rise in bit shipments of low-single digits % this quarter follows a rise of low-teens % last quarter. The first quarter of the year is seasonally slower for memory. Same as last quarter, there was no mention was made of the benefit of previously written-down inventory on margins this quarter. They did say that idle costs were lower in Q1-24 compared to Q4-23.

Bit Shipments and Capital Expenditures

Nanya is weak in the strength and language of their commentary on where memory markets are going. They make lukewarm predictions about the future that are watered-down versions of statements from the bigger players. For this reason, I heavily discount what they say about the future. But one can infer what they really think at times from other sources. This quarter, the company increased their capital expenditures forecast for 2024 from NT$20.0B (what they said at the end of Q4-23) to NT$26.0B. As with their previous forecast, ~50% of this will be on WFE. I suspect more than 50% of the NT$6B in new capital spending in 2024 will be on equipment, because facilities are built ahead of wafer capacity. Even with this higher forecast for spending on capacity in 2024, they stuck with their forecast for their DRAM bit shipments to grow “more than twenties % YoY”. This was the same forecast they made back in January. This statement leaves it open for them to grow bits as much as they want. The higher capital expenditures projection tells me they are going to grow bits about 25% more in 2024 than they planned on last quarter. This increase in planned capacity tells me the company is expecting strong demand and much better pricing for the rest of 2024, because they are still losing money today.

2024 Market Outlook

Nanya continued their tradition of almost-useless market commentary. They expect DRAM prices to rise this year from demand in AI for HBM and DDR5. Prioritization of HBM and other TSV products “may cause” constrained supply of standard DRAM.

  • · Server Market: Overall shipments are expected to “increase significantly” because of AI and high-end demand.
  • · Mobile Market: They are seeing smartphone sales in China recover.
  • · PC Market: No useful comment again, saying only AI PCs may contribute to content growth.
  • · Consumer Market: Demand remains stable in consumer devices, industrial and automotive.

Analyst Call

Prepared Remarks

  • · Most of the year-over-year improvement in revenue came from higher bit shipments. Pricing over that period was down some.
  • · Capital expenditures for the year will be “up to NT$26B” and bit shipments will be “up to 20% higher” than 2023.

Analyst Q&A

  • · Their segment share is 65-70% consumer, 10-15% low power (mobile,) with the balance in servers.
  • · In Q2 they will have even more improvement in idle cost than they saw in Q1.
  • · Nanya experienced some damage to equipment and product from the April earthquake in Taiwan.
  • · Their fab utilization is almost back to normal, except for the disruption from the earthquake. They no longer have underutilization because of weak pricing.
  • · Q1-24 pricing was “relatively low” because much of it was negotiated in Q4 of 2023, some in the early part of that quarter. Thus, they expect the second quarter pricing to be better than pricing in the first quarter.
  • · Some of the 20% potential bit growth in 2024 would come from reducing inventory they are still carrying.
  • · The 1-c node will pilot in 2025. In each generation (1-a, 1-b, 1-c, for example,) they target a 30% increase in bits per wafer. The CEO qualified this by saying it is a target, so he has room to not deliver this on every node, but useful to understand their goal for bit growth from node migration.
  • · Their increase in 2024 CapEx happened for two reasons. One was they didn’t spend some of the money planned in 2023, so it rolled forward to 2024. The second reason is prices for equipment and for construction are higher than previously modeled, so their spending budget increased to reflect this.


Nanya’s performance gives a pure view of the state of the DRAM market excluding the effects of AI demand, because they don’t make HBM or DDR5. These markets, while improving, are still weak, typical of pricing early in the recovery period of the cycle. This is only the second quarter of price increases. DRAM ASPs for Nanya have risen about 12% off the bottom. From the deepest downturn since the GFC, this is not nearly enough to justify new investment. Nanya said as much in their call, clarifying that the rise in CapEx from last quarter is not because of higher capacity plans. Rather, it is because of a combination of spending pushed out of 2023 and higher cost of WFE and construction than was previously planned. Nanya’s CEO is typically pessimistic so his optimism about DRAM pricing improving through the rest of 2024 is noteworthy. This release is a reminder that despite Micron’s stock price up 50% in less than two months, the memory cycle is still seen only two quarters of improving pricing flow through to company results. This means the cycle bottomed in late summer or early fall of 2023. Memory companies are only now crossing over into positive earnings. They are in a deep cash hole. Hopefully Samsung and Hynix hold the line on new investment plans the way Micron and Nanya have.

-Smooth Hughes (cyclical long MU)