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Micron chief warns 'severe shortage' of DRAM expected to continue this year
And drought in Taiwan threatens supply. Good news for firm's wallet, not so much for chip buyers
Micron CEO Sanjay Mehrotra has warned about a "severe shortage" of supply in the DRAM memory market, with the situation expected to worsen as the year progresses.
Speaking at an earnings conference call talking investors through the company's Q2 results, Mehrotra said: "As a result of the strong demand and limited supply, the DRAM market is currently facing a severe undersupply, which is causing DRAM prices to increase rapidly. We see the DRAM market tightening further through the year."
Micron's chief financial officer, David Zisner, added: "While demand is strong across both the DRAM and NAND markets, our supply is now constrained as our inventories are very lean, particularly in DRAM."
This, he said, would limit its ability to meet the anticipated surge in demand from data centre, cloud, and PC customers.
"[Our inventory is] pretty lean at this point. I mean all the inventory that you're seeing is either WIP or raw materials. There is a bit of finished goods, but it's [not] just the amount of finished goods we need to stage to meet the customer demand," Zisner later added.
The news is good for the storage firm, of course, for which DRAM accounted for 71 per cent of revenue.
Revenues for the quarter were $6.24bn, up 8 per cent quarter-on-quarter and 30 per cent year-on-year. DRAM accounted for a whopping $4.4bn of this. This represented growth of 10 per cent quarter-on-quarter and 44 per cent year-on-year. NAND accounted for 26 per cent of total revenue, or $1.8bn, growing 5 per cent against the last quarter, or 9 per cent year-on-year.
Micron's pessimistic outlook comes after a warning in March from CFO Zisner that global DRAM output would be "really tight" in the near future. However, in the weeks since those dire remarks, the memory manufacturer has been forced to tackle new challenges that threaten to further constrain its manufacturing output.
"Recently, due to the drought in central Taiwan, there has been a reduction in the water supply for one of our DRAM fab sites," said Mehrotra. While this hasn't had any immediate impact on the company's operations, the firm has been forced to obtain alternative sources of water and ramp up water conservation efforts. The company chief added this was a "developing situation," implying it may be forced to cut back if things worsen.
Micron isn't alone here. Earlier this year, TSMC was forced to begin trucking water to its foundry facilities in anticipation of government-mandated water conservation rules, as reservoirs reached dangerously low levels in the country's north.
Semiconductor manufacturing is an incredibly thirsty business. This applies to logic semiconductors (like processors) as much as memory. Plants routinely consume millions of gallons of water per day, which first must be treated in order to remove contaminants that could damage equipment and inventory. The resulting waste water is almost always heavily contaminated, and requires intensive treatment before it can be reused or returned to the public water supply.
Rival memory manufacturer SK Hynix recently raised a $1bn "green bond" from investors intended almost exclusively at managing its water consumption, with the cash earmarked for at new recycling and purification facilities, as well as investments on new low-power SSDs.
Although Micron's sales to storage clients declined modestly, the company reported a healthy resurgence in shipments to mobile vendors, up 44 per cent year-on-year. This, Zisner said, was thanks to the recovery in end-user purchases of smartphones driven by the global rollout of 5G. He also added that storage business sales are expected to rise this year as the company pushes its 176-layer SSDs into volume production. ®