Micron releases optimistic expectations; memory chips are expected to usher in a turning point in the cycle.

Affected by macro factors, the global memory chip industry market size will be US$134.4 billion in 2022, a year-on-year decrease of 12.63%. Due to their versatility, memory chips have a strong cycle, usually 3-4 years, as manufacturers adjust their production capacity according to the industry's prosperity. In terms of time, the current downward process has been close to two years. Regarding prices, DRAM spot, and contract prices are close to the bottom of the previous cycle. As major storage plants cut capital expenditures, we predict that the storage sector may usher in an inflection point in the second half of 2023. Micron said that customers' inventory in many downstream terminal areas has decreased, and the supply and demand pattern will improve in the next few months. At the same time, Micron's inventory turnover days peaked in FY23Q2, and it is expected to see a sequential increase in revenue in the future.

Smartphones, PCs, and servers are the three significant terminal demands for storage. In 2021, the downstream demand for DRAM will be about 39% for smartphones, 34% for servers, and 13% for PCs. On the demand side, as the economy continues to recover, global smartphone shipments in the second half of 2023 are expected to turn from negative to positive year-on-year. Benefiting from the influence of emerging applications such as Chatgpt, the growth of computing power is expected to drive the demand for servers. The DRAM capacity required by AI chips is about eight times that of ordinary server processors, and the NAND is three times that of standard servers. The demand side is expected to improve with the continuous implementation of artificial intelligence applications. On the supply side, at the end of 2022, Micron announced a 30% reduction in 23-year capital expenditure, and Hynix cut its capital expenditure by 70%-80%. As major storage manufacturers cut capital expenditure, the supply and demand structure of the storage market is expected to be further optimized.

The storage industry has high technical barriers, high-intensity capital investment, and a high market concentration. In the DRAM market, Samsung, Hynix, and Micron will occupy 43%, 28%, and 23% of the market in 2021, accounting for 94% in total; in the NAND market, in 2020, Samsung, Kioxia, Western Digital, Micron, Hynix accounted for 63% of the total.

Risk warning: Risks of macroeconomic fluctuations, risks of less than expected demand for consumer electronics terminals, risks of less than anticipated expansion of emerging application fields