September-October 2022 Memory Company Earnings

This is a review of the financial results from Micron’s peer companies in DRAM and NAND manufacturing, released in September and October of 2022. In this review, I’m only looking for information on the markets for memory products; pricing, supply-demand balance, capacity investment, etc.

October 11, 2022

Bit shipments were down low-20s% and ASPs were also down low-20s %. Demand for DRAM fell off a cliff this quarter. For the third consecutive quarter, the company reduced their full year 2022 bit shipment forecast, this time to down twenties %. Full year 2022 capital expenditures on equipment will be 40% than they were in 2021. The company said 2023 will be “no higher” than the NT$22B in 2023, with a large fraction of the spending on construction of their new fab. The DRAM market is worse than expected. Management said that Q4 is likely to be better because the market environment couldn’t be worse. This is quite a statement considering how bad the memory market can get. Nanya believes bit shipments will recover in the fourth quarter. Demand weakness is worst in PCs, especially the lower end, and in mobile. They didn’t say datacenter demand for memory has weakened, but indirectly they said datacenter construction is slowing. Nanya is taking constructive action to stabilize the memory market, though I think their view on when things will get better is optimistic.

October 27, 2022
Unlike past quarters, Samsung didn’t give specifics on how ASPs and bit shipments performed relatively this quarter. I hoped to hear more from Samsung that they are cutting production and holding inventory in both DRAM and NAND. The company is the leader in both memory types by a wide margin, thus the actions they take have the most impact on memory markets. They did say they will continue to hold inventory in the DRAM market rather than sell into weakening prices. On NAND they said they will continue to ship above demand in order to stimulate price elasticity. The company believes overall demand will increase in the second half of 2023. The PC and mobile markets continue to be weak. Customers are drawing down inventories rather than purchasing more memory. Server end demand is holding up. Unlike other memory companies, Samsung didn’t announce reductions in capital expenditures in 2023. They did say the CapEx they spend will be focused more on construction than on fab equipment. Their commentary was, I believe, purposefully vague. In the past, Samsung has used periods of weakness to nibble away a point or two of market share from other players.

SK Hynix
October 26, 2022

DRAM bit shipments were down mid-single digit % in the quarter. ASPs in Q3 were down around 20%. In NAND, bit supply declined low teens % and ASPs fell more than 20%. For the full year, Hynix expects market DRAM bit demand to grow low-teens %. NAND will be even worse, with full year 2022 bit demand up single digits %. Weakness in PC and mobile demand continues, with datacenter demand holding up. Management said they see PC demand weakness continuing into 2023 and they didn’t comment on the mobile segment. The weakness in server demand is from inventory digestion, not end demand softness. Most important, the company said they will cut capital expenditures in 2023 by more than 50% from 2022 levels. This is in response to a decline in memory demand that is more severe than any they have seen since the GFC in 2008 – 2009.

Western Digital
October 27, 2022

NAND bit shipments were down 10% sequentially. Over the last year, WD’s bit shipments are up a total of 9%. Like for like ASPs declined 17% Q-o-Q. That bring the total decline in NAND prices in the last two years to 22%. In aggregate, that is an expansionary gross margin environment as cost declines average 15% per year per bit. The company says consumer markets, following a free-fall that started in June, seem to be stabilizing. On the other side, datacenter demand seems to be softening. As the segments have similar frequencies to their supply demand waves, datacenter should bottom in April or May, by which time we will be seeing recovery in PCs and mobile. WD will reduce their capital expenditures in 2023 by 20% compared to prior guidance. This will lead to NAND bit growth in the low-to-mid 20% range for calendar 2023.

Micron Technology
September 29, 2022

The headline is Micron will cut capital expenditures in their fiscal year 2023, which started in September, by 50% over FY-22 levels. PC and mobile continue to be weak segments of demand. They are now seeing softness in industrial as well. Automotive continues to be strong. Data center revenue and pricing fell during the quarter as well, though this is believed to be from inventory reductions and not end demand. Automotive is still strong. Management characterized the pricing environment for both DRAM and NAND as “extremely aggressive.” For calendar 2022, DRAM industry demand will be low-to-mid single digit percent. For 2023, they are modeling mid-single digit supply growth, well below forecasted demand. In NAND for calendar 2022, industry demand growth will be slightly more than 10%, well below supply growth. 2023 supply growth is expected to be below demand. For the quarter, DRAM bit shipments were down 10% sequentially and ASPs were down low-teens percent. In NAND, bit shipments were down low-20% quarter-over-quarter and ASPs dropped mid-to-high single digits sequentially. This downturn has been swift and severe for Micron, taking their gross margins from almost 50% at the beginning of calendar 2022 down to a forecasted 26% for the September through November period. The CFO, who said more than the CEO wanted him to, revealed the company is assuming the market will start to recover in the quarter beginning in March of 2023.


Following a surprisingly good quarter for ASPs in Q2, in the third quarter pricing for both DRAM and NAND fell off a cliff, down from high teens to mid-20% sequentially. Both DRAM and NAND bit supply will be well above demand for all of calendar 2022, led by weakness in consumer, PC, and mobile. Micron and Hynix both announced capital expenditures cuts of more than 50%, so bit growth in 2023 should be well below demand. Samsung, the market share leader for both memories, was disappointing in the weakness of their commentary regarding reducing CapEx. Hopefully, they will take stronger action than they committed to. Their commentary was vague. Nanya is the most optimistic of the companies, saying they believe Q4 of 2022 will be the bottom for DRAM. Micron said their December-March quarter will be the bottom. Hynix and Samsung both predicted recovery in 2H of calendar 2022, a typically conservative forecast. I feel good about the cuts from Micron and Hynix leading to a recovery next year, but not until at least the Summer. I would feel better if Samsung had also announced strong actions to reduce CapEx, though they may be being coy. Such a severe drop in prices typically leads to a sharp recovery, when it does come.

– S. Hughes (long MU)