When Micron shares mark a new low for the past 52 weeks, memory chips market is predicted to improve in the second half of 2019
Micron shares close at $30.32 with more than 3% decline on December 21 according to foreign media report on December 25. It continues to fall and close at $29.02 which marks a new low for the past 52 weeks on December 24, the day before Christmas.
The slide of Micron shares is because its earnings don’t reach expectation although profits are more than expected according to the first fiscal quarter financial report released by itself. Besides, Micron has adjusted some major clients’ inventories causing the weakness of second fiscal quarter guidance, which becomes a threatening for its shares.
Micron shares have decreased by 26.3% which is in contrast with Standard & Poor’s 500 Index.
What affects Micron shares?
It impacts Micron that its clients have excess inventories in cloud computing, graphic processing and business market. Falling demand of major clients such as Intel and NVIDIA is a main disadvantage for Micron.
Intel’s lack of CPU demand as well as weakness of high-end smart phone is drag on demand of NAND solution. The earnings of graphics and data center market will be impacted by game cards inventory which is higher than normal level and relevant requirement of cryptocurrency falling according to Micron.
This situation drives Micron to lower its demand and supply expectation in DRAM and NAND flash solution, and announce it will reduce its capital expenditure.
Micron lowers NAND growth expectation and the reduce its capital expenditure, because the increase of NAND supply will exceed its demand in 2019 according to it's expectation.
There is a ray of hope.
However, the demand of memory chips will improve in the second half of 2019, when there will be a situation with bleak DRAM supply, clients’ inventories falling and strong demand, said by managements.
It will promote the mobile devices that the increasing demand of new camera and digital function, as well as more and more applications of artificial intelligence according to Micron. The strong demand from data center is good for DRAM products with high density, while car entertainment and advanced driving assistance systems will steadily promote auto market.
What’s more, Micron plans to manage its operations expenditure by controlling stuff numbers, slowing holiday work progress and reducing disposable expenditure.
It is optimistic that although the pricing of NAND and DRAM are threatening itself, Micron still focuses on improving cost structure and enhancing solution group with high value in portfolio.
It is notable that Micron launched a high-value solution by managing NAND products which made its NAND gross margin to keep over 45% according to financial report in last fiscal quarter.