Lehi’s Long Shadow – Micron And The DRAM Industry Confront The Nvdimm
Summary The drivers of a strong #DRAM business for the balance of the decade are discussed. The potential impact of the recent Lehi expansion is quite significant. The Non-Volatile Memory DIMM ( #NVDIMM ) and its relationship to DRAM is discussed. As I wrote in my last article, there are good reasons to invest in Micron (MU). Most of these relate strongly to Micron’s core DRAM business – a franchise shared by only two other companies, both larger than Micron. As we have discussed many times, the DRAM business is an especially strong one because of three primary reasons: Demand is surging due to several factors, most of which relate to the industry’s transition to the “memory-centric” computing model, the end product of which is rapidly increasing content growth in both server and client devices. DRAM scaling has become more difficult, more capital intensive, and less productive as we near the end of Moore’s law. The three-member DRAM oligopoly has a strong financial incentive to add new capacity in such a way that it lags demand growth (We’ll call this its “lag strategy” for short). This strategy, born of calculation and caution, has the effect of keeping capacity below demand, supporting higher DRAM prices and industry profits. Add the three factors above together and you get three suppliers that are highly motivated to carefully manage the one side of the demand/supply equation that they can manage – industry capacity – even in the face of the strong demand environment that currently exists. Taken as a whole, these factors explain why the industry is so profitable and why it is likely to remain so (Outside of a global economic collapse).