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Technology Stocks : WDC, NAND, NVM, enterprise storage systems, etc. -- Ignore unavailable to you. Want to Upgrade?

To: Sam who wrote (4124)	4/16/2019 11:16:00 PM
From: Elroy	Read Replies (1) \| Respond to of 4827

the second half expectations of a revival of the tech markets look probable to me. A second half revival of tech markets seems a given to me. Q4 last year and Q1 this year have been so awful, it would be really hard for the second half to avoid a pick up. But when prices are down 70% year on year, the magnitude of the "pick up" is what matters. If demand for GB's of memory increases by 15% rather than the expected 10% (for example), it doesn't help the makers out enough to overcome the situation. It seems to me like somehow at the same time that NAND production began to meaningfully outpace demand, demand collapsed due to an inventory correction as the device makers made significant cut backs to purchases in Q4 2018 and Q1 2019 especially. Once the device inventory is flushed out of the eco-system (hopefully by now) the device makers must begin purchasing again. Voila - the H2 2019 pick up is guaranteed. But for the NAND industry at least, what cost $4 last summer seems like it will cost $1.50 this summer. So you can get a demand pick up, and revenues remain massively below recent history. I think the memory industry needs more than a "pick up" in tech or in the economy. It needs memory price declines to slow and be consistent with production improvements. If prices fall by 10% in a quarter, but production efficiency improves by 10%, it's a wash. This past year prices have been collapsing. It also needs revenues to stabilize or actually increase as the makers sell more bits for less prices, but the volume increase is faster (or at least in line with) the bit price decline. For memory price declines to slow the inventory on the NAND makers balance sheet has to AT LEAST stabilize rather than grow each quarter. I'm still waiting to see how the NAND makers get all of their existing NAND inventory off of their balance sheet. It seems like it should require another round of MASSIVE price cuts per bit. We shall see. So far the latest data point is Micron saying next quarter revenues are going down and inventory is going up. With guidance like that, why believe the industry is at or near bottom now? the major players have all exercised prudence in pulling in their capacity build plans. My understanding is that they mostly announced cuts to cap ex expansion plans last summer, and the cuts begin reducing growth plans beginning about now. So....they will continue to realize the production expansion benefits of Cap Ex spent over the past two years, but in 2020 for example, their production will grow a bit slower than theoretically possible. Is it enough for bit prices to stabilize, and enough for them to unload all the inventory which has been growing on their balance sheets since Q1 2018? I don't know. It seems hard to imagine that suddenly the economy will pick up a bit, and therefore bit demand goes up 100% at existing prices or whatever large growth rate it will take to consume all the inventory manufactured 3-6 months ago (it's still sitting on the maker's balance sheets, losing profitability by the day). Q3 is always the big quarter. We will know by then whether the NAND industry has stabilized, or there is just TOO MUCH production for too little demand. Fun to watch and see..... It makes sense to me that this downcycle is much worse than recent downcycles since the 2016-2018 up cycle was so amazing strong. Surely all the happy NAND makers expanded as fast fast fast as possible in the good times, and now it's time to suffer the consequences?