DRAM prices fell 30% in the first quarter, Micron cut production to boost demand in the second half of the year

The three major memory manufacturers in the Taiwan Stock Exchange, including Nanya Technology (2408), Macronix (2337) and Winbond Electronics (2344), expect the market conditions this year to be in a period of destocking in the first half of the year, and the industry recovery can only be expected in the second half of the year. The biggest variable affecting the market supply and demand throughout the year is the subsequent development of the US-China trade war. However, industry insiders also said that Micron’s recent announcement that it will reduce production by 5%, although the impact on the overall market supply is not too large, it is still expected to have a positive effect on the recovery of the memory market in the second half of the year.

The global memory prices were expected to fall in the first quarter of this year, but the price drop in the first quarter exceeded the original market expectations. Among them, the price drop of DRAM in the first quarter expanded from the original estimate of 20% to 25% to nearly 30%, which is the largest single-quarter drop since 2011. As for NAND Flash, although the supply and demand situation is relatively good, the price drop in the first quarter of this year also reached 20%, which also exceeded the market expectation and was heavier than that of each quarter last year. Although most industry players expect that after the decline in the first quarter was significantly larger than expected, the decline in the second quarter will have a better chance of convergence, but before the demand has not recovered significantly, the market situation is still not optimistic.

NAND Flash prices began to fall at the beginning of last year, and DRAM also failed to hold up in the fourth quarter. With the trade war, slowing global economic growth, and stagnant sales of mobile phones and consumer electronics, the oversupply is even more serious this year. Recently, the US manufacturer Micron announced that it will reduce production by 5%. In response, Nanya Technology General Manager Li Peiying said that this has positive significance for the industry and the decline in product prices is expected to slow down. He also expects that the decline in DRAM prices will gradually narrow in the second quarter, and the third quarter coincides with the peak season for the industry, and the demand for products such as mobile memory and consumer memory is expected to heat up.

The market rule is that from an industry perspective, Micron's production cuts have not had a very obvious effect on improving the overall supply and demand of the market. However, based on the previously understood market inventory levels and industry business cycles, it was originally expected that it would take three quarters from the fourth quarter of last year to the end of the second quarter of this year to clear the inventory. Therefore, even if Micron did not cut production, the market might still bottom out in the second quarter. However, Micron's production cuts still have positive implications for the industry, and many industry players are still optimistic that memory devices will be able to escape the second quarter trough when the third quarter peak season arrives.