4.30.24
Samsung is the market leader in both DRAM and NAND and their memory divisions are just part of a massive conglomerate. I look through their earnings presentation and conference call transcripts for insight into the state of the memory market. This is not an analysis of their earnings, prospects, etc.
Earnings Presentation
- · Overall demand was strong in the quarters and prices continue to rise, with solid demand for DDR5 DRAM and SSD storage, for AI applications. They didn’t mention HBM as a source of demand because Samsung is in third place in these products and is selling little of them.
- · In the second quarter, demand for both AI and conventional servers is expected to grow.
- · Mobile demand in Q2 will be stable. The company will allocate more to server and storage than to PC and mobile to increase profitability. Said another way, PC and mobile will continue to see lower demand growth than servers.
- · For 2024, overall memory business is expected to remain strong, led by server demand. PC and mobile demand are forecasted to improve this year with the adoption of on-device AI applications.
Earnings Call
These are the highlight quotes regarding DRAM and NAND:
- · Higher profits this quarter were higher because of better pricing in DDR5 and SSD products. They didn’t mention HBM, because they are not making meaningful revenue yet from that product category.
- · Their capital expenditures in memory this quarters went to facilities and packaging technology for DDR5 and other advanced products. It is good their spending didn’t go to wafer capacity, at least not enough to include in commentary.
- · Demand for both DRAM and NAND was strong in the quarter, leading to higher ASPs. Because of this, Samsung’s memory business returned to profitability in Q1.
- · Strong demand, led by AI products, is expected to continue into Q2. Demand for mobile product memory is forecasted to be stable in the second quarter. Memory will be constrained in the second half of the year with prices continuing to rise.
- · Mass production of HBM3e in an eight-high stack began in Q1.
- · In the second half of 2024, the company expects continued positive business conditions. The server market will be strong. The replacement cycle in PCs, including purchases for AI features, is expected to come in 2H 2024.
- · Memory demand will be strong in the second half of this year while supply growth will be limited, the result of low investment in the past year. NAND was mentioned specifically. The company expects to adjust their product mix in response to demand. This means they are shifting as much capacity as possible to HBM.
- · In Q1, Samsung’s DRAM bit shipments declined by mid-ten-percent (was up mid-30% range in Q4-23). ASPs increased 20% in the quarter (was up very low double digits % in Q4-23). Q2 bit growth is expected in the range of low single digits to mid-to-high single digits percent.
- · In Q1, NAND bit shipments declined by low single digits percent (was up in the mid-30% in Q4-23) and ASPs increased by low 30% (was high-single-digit % in Q4.) For Q2, the company expects their bit growth to again decline by low single digits.
- · The rise in ASPs for both memory types was “above expectations.” Selling of previously written-down inventory contributed to the profitability in the first quarter.
- · Overall industry supply growth is limited supply and focused on HBM.
- · They are seeing increased demand for SSDs related to AI training, as data sets are growing beyond current storage capacity.
- · Samsung made the same comments on industry bit growth that Micron and Hynix said. That is, HBM demand is soaking up supply and so other DRAM segments will see constrained capacity. In NAND, reduced investment in capacity in the last year has led to low supply growth now. Leading edge products are supply constrained today and are expected to see additional tightening as the year progresses.
Summary
No mention of fab underutilization, either in prepared comments or Q&A. As is usually the case, Samsung under-called the strength of the rise in memory pricing this quarter. When the upturn begins, it is always stronger than the executive teams at memory companies forecast it to be. They have had all optimism beaten out of them by the downturn at that point. Also, their finance teams and business unit leaders don’t want to forecast quarterly results that the come up short on. This inaccuracy to the low side spreads to investors though quarterly guidance, leading to the rise of memory company stock prices through the cycle, as the true nature of market strength emerges. It is unusual to see Samsung so far behind on such an important product as HBM. They are in last place among the Big Three DRAM makes. So it is surprising that Samsung saw ASPs rise by 20% in the quarter, the same as what Hynix saw. Both companies reported NAND ASPs increased around 30% in the quarter. Unlike Hynix, this was not the second consecutive quarter of 30% sequential ASP increases. Samsung was typically reticent in their commentary on capacity investment. They said in the second quarter their CapEx will be focused on cleanroom space and on HBM packaging. No guidance was given on their investment plans for the rest of the year, nor did they comment on their view of the DRAM and NAND markets overall. While it lacked forecasts I want to see from these companies, what they did say about current conditions was all positive for Micron. Their view is consistent with what Micron and Hynix have said. That is, the upturn is underway, demand will be ahead of supply for at least the rest of 2024, leading to further rises in ASPs, led by the server segment and AI needs. Samsung was tempered in their commentary about the mobile and PC markets.
-S. Hughes (cyclical long MU)