Skip to main content

Finally a bottom in NAND pricing?

I have written before about SanDisk (SNDK) and have owned the stock several times over the years. Recently, the stock seems to have bottomed at about $20 and has now rebounded to over $30.

Today's strong move up was due to a bullish opinion on the company from Citigroup's Craig Ellis. He sees the stock hitting $35 based on tier-1 OEM customers poised to provide large orders, more products designing in ever greater quantities of flash (solid-state disk drives, for example) and a supply environment more conducive to firming prices.

Ellis could be right in his call. SanDisk reported earnings in mid-April that were less than expected but revenues that beat expections. Management pointed to tough pricing that kept margins under pressure.

So has NAND pricing finally hit bottom? Let's hope so. To show how serious the pricing pressure has been, the unit price of the benchmark 8Gb NAND flash chips for high-end handheld devices declined to $2.7 from $8 last September. Here is a quick survey of several sources that might shed some light on the subject.

First, we have a report today from DRAM Exchange. Here is the money quote: "demand for NAND Flash will improve as end product makers stock up in anticipation of 2H08 hot season. Because of the reduction and relatively conservative capital expenditures, we expect oversupply in 2Q08 will improve and reach a balanced condition in 3Q08. Subsequently, we expect NAND Flash price to stabilize and gradually rebound as the 2H08 demand increases."

Next we have a couple of reports from the Korea Times. The first one, from 3-27-08, supports our thesis that supply has stopped growing at a rate exceeding demand. The report states that Hynix Semiconductor, the world's No. 2 memory chip manufacturer after Samsung Electronics, said it will curtail its investment in chip production lines in the latter half of the year as unit prices of both memory and flash chips have fallen below the break-even point.

The second report from the Korea Times, posted 4-3-2008, pertains to Samsung. In this case, the manufacturer has said it has no intention of reducing output.

Finally, there was a report from from 5-9-2008. The title of the post says it all: "Memory Prices Heading Up." The post quotes Nam Hyung Kim of iSuppli as saying that OEMs used inventory from mid-Q1 to mid-April, resulting in very few orders. This also reduced the amount of memory being ordered, which forced memory makers to cut back their manufacturing. "Price is going up because now is the time for OEMs to acquire more inventory," Kim said. "So we are detecting a lot of orders from OEMs that aren't just for now, but so they can build some inventory for the holiday season. Prices are pretty much at the bottom. If we expect prices to go up, then the best time to get it is now."

So once again, have we really seen the bottom in NAND flash pricing?

Despite Citi's Mr. Ellis, I can't agree that the answer is a clear cut "yes". Hynix has stopped investing in more capacity but, as far as I can tell, they have not actually reduced output of current manufacturing capability.

The good news is that demand appears to be increasing. Some of this is a seasonal effect as manufacturers ramp up for holiday sales. As Mr. Kim of iSuppli says "Flash demand is 85 to 90 percent consumer-driven, and consumer demand slowed down due to weak consumer confidence. NAND flash should be more sensitive to the economic conditions."

So we see that finally we are dependent on the stretched consumer to put a bottom in for the NAND industry by stepping up and purchasing electronic gadgets and PCs. This leads us to the question of whether the consumer has the ability to keep spending on non-essentials in the face of rising gasoline prices, falling housing values, a shaky job market, etc. That, I'm afraid, is a discussion for another time.

Disclosure: at time of writing, author has no position in SNDK


Popular posts from this blog

Running TradeRadar on Windows 7 and Windows 8

Development of the original TradeRadar Stock Inspector software was begun back in the days before Windows 7 and Windows 8 were available.

As these newer versions of Windows have become more popular, we have heard from some users that they are having problems installing and running TradeRadar on their newer PCs.

The good news is that TradeRadar will work just fine on Windows 7 and Windows 8. All you have to do is adjust the Windows Compatibility Settings to ensure TradeRadar runs as intended.

It is recommended that you can apply Compatibility Settings when running the initial installation; however, it is also possible to apply Compatibility Settings after the program has been installed.

Prior to installation
After downloading the install program, go to the folder where you have stored the TradeRadarStkInsp_7_Setup.exe or TradeRadarStkInsp_7_PRO_Setup.exe executable. Right-click on the executable file and select Properties. Click the Compatibility tab. Adjust the Compatibility mode to …

Alert HQ has moved!

End of an era!

This site was started way back in 2006/2007 to showcase my blog posts and the Alert HQ buy signals and sell signals. Alert HQ grew to include other kinds of stock alerts including Swing Signals, Trend Busters, Trend Leaders, Cash Flow Kings and more.

In the meantime, I built a sister site, and I started using some of the same Alert HQ content over there. As a result, I am discontinuing the Alert HQ data here at

The good news, however, is that all the Alert HQ signals and stock screens are still completely free. In addition, the pages have been enhanced so that you can hover over a stock symbol and a small chart will pop up so you can get a quick look at the stock's recent price action. If you click on a symbol it will take you to a page with plenty of financial and technical analysis information (still free!) as well as a larger chart that you can play with in terms of adding or deleting indicators, moving averages, etc.

Click …

Durable Goods report for Sept just so-so but Computer segment is on fire

The Durable Goods advanced report for September 2011 was released on Wednesday.

I like to dig into the Durable Goods report because it can be useful for seeing how tech in aggregate is performing and how the sector may perform in the future. I always focus on two particular measures: shipments and new orders. Let's see how it played out last month.

Shipments -- 

I generally give less importance to Shipments since this is a backward looking measure reflecting orders that have been confirmed, manufactured and shipped. It's similar to earnings reports -- it's good to know but the data is in the past and we're more interested in the future. The following chart shows how September shipments looked for the overall tech sector:

Results for the overall tech sector were a bit weak but take a look at the next chart which tracks the Computers and related products segment:

Results here were actually quite good and, to make things even better, the previous month was revised upward.