Credit Suisse: DRAM Supply Fears 'Overstated'

In a new report, Credit Suisse analysts John Pitzer takes a look at the growing concerns within the semiconductor equipment space that Samsung Electronics Co SSNLF has been flooding the market by “irrationally” adding dynamic random-access memory (DRAM) capacity during its conversion to 20 nm. According to the report, these fears are overblown, and the industry is approaching an upcoming period of undersupply.

Supply in check
Analysts point to demand weakness, not oversupply, as the underlying cause of low prices so far in 2015. PC DRAM prices are down 20 percent year-to-date, and blended DRAM prices have fallen 13 percent in 2015.

Analysts are projecting DRAM supply growth for the first half of the year of 30 percent year-over-year (Y/Y) and demand growth of only 28 percent Y/Y. However, in the second half of 2015, Credit Suisse expects the balance to shift to 24 percent Y/Y demand growth and only 22 percent supply growth.

“The industry is heading into a period of undersupply, which should lead to more stable pricing starting in the month of June,” Pitzer explains.

Projections
Credit Suisse is projecting 25 percent Y/Y DRAM bit growth in 2015 compared to 35 percent growth in 2014. Analysts are calling for only 23 percent bit growth in 2016 and believe that growth numbers have been peaking in the first half of this year.

Will Micron deliver?
Credit Suisse’s revenue forecast for Micron Technology Inc’s MU May quarter come in just shy of consensus estimates. Credit Suisse is calling for earnings per share (EPS) of $0.61 on $3.93 billion in revenue, while the Wall Street consensus is EPS of $0.61 on revenue of $3.95 billion.