None of the metrics at the Yahoo site will be accurate right now. They don't incorporate the Elpida numbers, so they are backward looking. Yes, Elpida declared bankruptcy last year, and Micron gave them a loan so that they could buy some equipment upgrades and pay down some debt when they were hurting. Things looked bleak. But the price of DRAM has increased dramatically since last November or so, going up by 80-100%. Elpida is now profitable. If you believe that the price of DRAM will collapse again, then for sure you should not invest in Micron. If you believe the oligopoly argument--three companies now control about 90% or a little more of the DRAM market, with the other 4 or 5 players out of money, nearly bankrupt themselves, having to sell fabs and equipment to stay alive, and downsizing into focusing on specialized niche markets--if you accept the oligopoly argument, then Elpida and Microns' DRAM division should be profitable for quite awhile to come, as long at least as the macro environment is healthy, and mobile continues to be strong.
Hynix is converting some 20-30k DRAM capacity to NAND, and Samsung already has converted PC DRAM to mobile DRAM and is buying PC DRAM from Hynix, according to reports, because they can't make enough for themselves. Micron is selling PC DRAM at profit despite there being a very weak PC market. Micron's NAND business is doing well, especially their SSD division, and contrary to what Tristan Gerra said last week, demand for NAND has not been slowing down. Actual users of NAND have reported continued tightness in various NAND segments--it is a mistake to think of NAND as one market, it isn't, actually it is pretty highly segmented, so that there could be allocation in one area but sufficient supply in another. While in theory companies can shift production to the tight segment, in practice it isn't always so easy because of how the fabs are set up. But never mind that, SIMO, AAPL, FIO, OCZ--each of them dependent on NAND for their business--all have reported either tightness or a healthy supply-demand balance. This comes after a seasonably very strong Q1 and Q2. The worry, of course, is that all this conversion to NAND will create another glut. Micron just estimate that there will be about 100kpm new wafer capacity next year. That isn't nothing, but IMHO it will be easily and profitably soaked up by SSD demand, with both enterprise and client demand strong and getting stronger. The beauty of the SSD market opening up is that if a vendor does have extra capacity, it can just make higher capacity drives. Sure, that will have a cost, but it is also likely to have a good margin. The SSD revolution is just beginning, in the second or at most top of the third inning, with plenty to go.
Well, that's enough babbling for now. |
