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Expected memory market rebound in 2020 will help Samsung recover


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Expected memory market rebound in 2020 will help Samsung recover

After a rough 2019, the memory market could rebound somewhat in 2020, according to a study, a projected change that could relieve some of the revenue strain felt by Samsung Electronics Co. Ltd. and Micron Technology Inc.

Semiconductor research firm VLSI Research is projecting revenue from DRAM — a type of memory used to temporarily store data — to reach $89.7 billion in calendar 2020. That would be a 10% increase from 2019 DRAM revenue of $81.8 billion. Nevertheless, DRAM revenue is expected to remain well below the 2018 total of $99.4 billion.

In terms of revenue, DRAM is the single biggest sector in semiconductors, which also includes processors, storage, sensors and other circuits. DRAM chips are important waypoints to store data when a computer is turned on. The more DRAM, the faster a computer.

The DRAM market peaked in 2018, with revenues reaching an all-time high, according to VLSI. But a DRAM price crash, global trade issues and a weakness in smartphone and PC demand are expected to cause the DRAM market to stumble in 2019. These facts have already affected fiscal 2019 revenue projections for both Samsung Electronics and Micron.

Memory makers are adjusting operations to clear out existing inventory. Micron, for instance, has cut capital expenses involved in manufacturing DRAM to clear out its inventory before it starts making new units, said Risto Puhakka, president of VLSI Research.

Samsung, meanwhile, is keeping capital expenditures flat but still investing in new factories with the expectation that product demand in various sectors, including DRAM, will rise in coming years once global trade issues have been resolved, company executives said on a Jan. 31 earnings conference call.

On April 5, Samsung said it expects its first-quarter operating profit to plunge about 60% year over year as the company grapples with a weak memory-chip market. Consensus analyst estimates from S&P Global Market Intelligence have Samsung Electronics reporting total revenue of $198.31 billion in 2019, down from $214.35 billion in 2018. However, revenue is expected to bounce back to $212.91 billion in fiscal 2020.

Micron in March announced it expected revenue in the upcoming fiscal third quarter ending in May to be approximately $4.8 billion, plus or minus $200 million. That is a decline from $7.8 billion in the fiscal third quarter of 2018, in which 71% of the revenue was generated by DRAM.

Analysts expect Micron's 2019 revenue be $21.30 billion, down from $31.50 billion in fiscal 2018.

The memory market goes through supply-demand swings depending on demand and how many fabrication plants are running, said Jim McGregor, principal analyst at Tirias Research.

"A lot of that depends on the global economy. As long as the global economy keeps growing and there is a demand for electronics, recovery is likely," McGregor said.

While smartphones and PCs are struggling, demand for data-center products like servers are booming, so "demand will come closer to equilibrium" in 2020, McGregor said.

Advances in technology will also drive demand of memory, McGregor said. Data centers typically use more expensive higher-capacity memory for faster movement of data.

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