Memory Industry Update (SMOD, STEC, SNDK)

Analysts at Thomas Weisel Partners Group Inc. (NASDAQ: TWPG) have released a report on the memory industry represented by SMART Modular Technologies Inc. (NASDAQ: SMOD), STEC Inc. (NASDAQ: STEC) and SanDisk Corporation (NASDAQ: SNDK). According to the report, DDR3 prices for December are up 1% over November, while DDR2 prices for December are up 9% over November.

According to analysts, ASP erosion will be less than seasonal going into 2010 given continued supply constraints. Meanwhile, the 16Gb MLC NAND Flash prices for December are down 1% over the previous month and the 32Gb MLC prices are up 9% for December over the previous month, according to the report.

For the year, prices are up 101% and 65% for 16Gb MLC and 32Gb MLC, respectively. Analysts expect a healthy 2010 due to the unusual price environment in 2009 combined with constrained capex budgets. Analysts expect ASP erosion of roughly 40% but believe that if cost reductions outpace ASP erosion, memory manufacturers can expand their product gross margins. Analysts at Thomas Weisel have an Overweight rating for SMART Modular Technologies Inc., STEC Inc. and SanDisk Corporation.