How quickly the cycle turns. Barely a year ago D-Ram chipmakers couldn’t move fast enough to cut capacity as they struggled with oversupply during the industry’s most severe downturn. On Wednesday, the head of investor relations at Micron, the US memory chip company, confirmed what many analysts had been predicting: There is a shortage of Nand flash memory and D-Ram in the market.
This good news is tempered by the consideration that, over the history of the D-Ram industry’s existence, any shareholder gains made during the upturn have inevitably been destroyed in the next downturn. Many D-Ram makers, when presented with that fact, had last year vowed to be more disciplined should they make it out of the downturn, but can the tiger really change its stripes?
Micron’s Kipp Bedard told an investors’ conference in Taipei that his company had no plans yet to build any new factories and observed that this time, there is a chance that things might be different. He said he had “never seen this big a debt structure” in the D-Ram industry since he joined Micron in 1983. Many players had been so badly hit that they would likely focus more on “horrible balance sheets that need to be fixed” rather than building new factories.
Unlike in the past, this upturn in the D-Ram industry also coincides with a strong lift in demand in other memory products and emerging demand for solid state drives. This “rising tide theory”, Mr Bedard said, meant that the industry’s investment would likely be spread across different segments, which would help mitigate against a big expansion in one particular category.
The severity of the downturn had also widened the gap between the top players – such as Samsung, Hynix and Micron – and their smaller rivals, which could help lead to quicker industry consolidation in the next downturn.
Despite all this, however, Mr Bedard told investors that to some degree, things would remain the same. “Will we overspend in the future? Sure,” he said. “We haven’t changed our stripes that much”.
