Western Digital Q3-22 Results

April 28, 2022

WD doesn’t have a DRAM business, and they sell hard drives in addition to NAND and SSDs, so I read their releases for insight into the NAND market.

Earnings Presentation

• NAND bit shipments decreased 14% sequentially (was up 13% in the previous quarter)
• Like-for-like ASPs were down 2% (was down 3% in the previous quarter)
• Here are the last six quarterly changes in NAND ASPs (like-for-like, from most recent to oldest): down 2%, down 3%, flat, up 4%, flat, down 6%. Putting this all together, like-for-like NAND prices for WD are down about 7% in the last 18 months. This is a positive margin environment for NAND makers because their costs decline around 15% per year.
• Blended NAND ASPs declined 1% QoQ (down 6% in the previous quarter)
• The company’s NAND gross margin declined slightly this quarter, to 35.6%. The previous four quarters were 36.1%, 27.1%, 30.0%, 35.5%.

Conference Call

Quotes are in italics

David Goeckeler – Chief Executive Officer

We successfully managed through a fab contamination event that is now fully resolved.

Let me now offer a few observations on the demand environment. In cloud, we see continued strength in calendar year 2022. The increase in cloud capital investment for data center build-outs is expected to propel growth for our HDD and flash products in this growing end market. In client, PC end demand growth has been solid for the last two years, and we are starting to see some normalization in the PC market. We expect PC unit demand to remain significantly above pre-pandemic levels, with the return-to-site trend driving a mix shift toward commercial and enterprise PCs with richer client SSD content versus consumer-oriented PCs

Flash bit shipments decreased 14% sequentially and increased 9% year over year. During the quarter, we recognized the majority of the bit supply impact caused by the fab contamination.

Question and Answer

In the flash business, we expect some acceleration of gross margin given the supply demand balance situation.

Their long-term target for NAND cost reduction continues to be 15% per year

our [NAND]bit growth will be down this year. We’re not going to put a fund number out there right now. But given the fab excursion, we’ll be down this year.
And then we’ll make it up over the next year or so, a year plus. It will take a while to fully come back to our fair share of bits. Our strategy has been very consistent for a long time. We invest to maintain share.


The NAND pricing environment continues to be positive for memory makers. This was aided by the large excursion at Kioxia, the WD-Toshiba joint venture that makes NAND wafers for both companies. Even before that event, which took significant supply off the market, the NAND pricing environment was surprisingly positive, given the amount of bit supply that has been added by Hynix and Samsung. WD’s management predicted that NAND gross margins would expand through the rest of 2022. This is not quite saying that ASPs will go up, but it is predicting a favorable enough environment that cost declines will outpace how much pricing drops. WD will see costs drop faster than normal as they recover from their output reduction from the excursion. Fabs have large fixed costs so any reduction in output increases unit costs. The unit it in this case is NAND bits. Remembering that memory pricing is unpredictable over the short term, the WD executives must be confident that the NAND supply-demand balance will stay healthy for the rest of 2022 to predict gross margin expansion. Two takeaways for Micron shareholders here. First, the reduction in supply caused by the Kioxia excursion is mostly or completely in the past. Second, the NAND market will stay at a similar level of health for the remainder of 2022. Within demand, WD believes the PC market and data centers will be the drivers of NAND bit consumption for the rest of 2022.

-S. Hughes (long MU)