Hey, just speculating. I've been wrong before. Maybe more than once.
But seriously, I don't see how NAND does anything remotely OK with what little I know of what's going on. Production is increasing still. I think the CapEx cuts announced in Q2 2018 take affect on planned NAND production which was expected to launch in Q3 this year, so until then production of bits continues to ramp pretty strongly through Q2 this year. Demand stinks, that is obvious.
The price of NAND is plunging, that has been obvious since about Q2 last year, and continues through today. That 256GB TLC chip was $4 last June, and is $2.26 and declining still today. NO company can handle price declines of that magnitude in less than one year and still be OK. The thing that makes the price declines SORT OF acceptable is that things were best ever record good times in Q2 2018 last year, so there is a LOT of gross margin dollars that the NAND makers are able to lose before the shit hits the fan. But come on, $4 to $2.26 in 9 months, I think 75% of the gross margin cushion has vanished, so price declines from here are, ahem, more serious?
And inventory at the NAND makers is high, that's seen in the Q4 2018 reports when "weeks of inventory" shot up from Q3 levels. I think inventory will increase again in Q1 this year. Production up, demand down, where else can the produced chips go but on the NAND makers balance sheet as unsold inventory, rapidly losing gross profit potential as spot prices fall? NO ONE wants to hold that inventory, and it's on the NAND maker's balance sheet. They got the hot potato, they gotta get rid of it via MORE PRICE CUTS.
I think in order to fix those problems, the NAND makers need to do a MASSIVE dump of CHEAP memory bits, into the market, at whatever cheap price will absorb all those bits. Has this happened yet? I don't think so. That event is what we call the blood running through the streets. So far all we have is massively profitable quarters of NAND production which are only disappointing because they aren't the all time record quarters which preceded the massively profitable quarters. Where da blood? has the memory dump already happened? I doubt it. It hasn't appeared in the prices of the SSDs that I track. NAND inventory held at the NAND makers I think will increase again in Q1 2019. Inventory will continue to increase until we get the blood. In order to flush all that inventory through the eco-system, I think prices of SSDs and EVERYTHING ELSE involved in NAND has to collapse so much that buyers want the cheap 512GB phones at 512GB SSDs in their phones and PCs because.....it's so cheap, why not?
Just my guess.
I don't pay much attention to DRAM and haven't got any feel for what's going on there. But I don't think NAND bottoms in Q2, I think NAND needs the day of reckoning with BLOOD IN THE STREETs, which may be Q2 guidance ("Help! This is a disaster! We're going broke") or it may be Q3 guidance or Q4 guidance ("Help, there's no bottom and we've got LOADS of old unsold expensive COGS chips on our balance sheet that we gotta sell at a loss!!"). Or maybe the bottom is in 2020 when WDC goes bust and gets acquired by ...... anyone, maybe acquired by cash rich SIMO!
What I think this market needs is Intel acquires MU and SIMO. Makes sense to me...... |
