Nomura Securities released a report saying that with weak market demand, the memory industry is expected to usher in a more severe hard landing in the near future , but demand elasticity and production cuts are potential positive catalysts.
Nomura Securities believes that the technology hardware market has entered a severe recession, and the deterioration rate is faster than the overall macro economy. The industry originally benefited from the need to work from home during the epidemic, but with the reopening of economic activities in various countries, and the Russian-Ukrainian war pushed up the market. Expansion and financial burden, the industry trend has turned sharply.
Nomura Securities said that as downstream customers are adjusting their inventories, the inventory level of memory manufacturers is rising rapidly, and the pricing power is also rapidly shifting to memory customers, and memory prices are expected to fall further .
Nomura Securities previously expected DRAM/NAND prices to drop by 10-12% in Q3, but now it is expected to drop by 15% quarter-on-quarter and another 15% quarter-on-quarter in Q4 (previously expected to drop by 10-12% quarter-on-quarter).
Due to slowing demand, Nomura Securities expects DRAM shipments to grow by 5-10% annually in 2022, not as good as the 18% annual growth forecast earlier this year and the 12% annual growth forecast a month ago; NAND demand is expected to increase by 15% annually -20%, down from the 30% annual increase forecast earlier this year and the 22% annual increase forecast a month ago.
Nomura Securities expects memory makers' inventories to reach 8-11 weeks during the first half of 2023 . Nomura Securities believes that in terms of supply and demand dynamics and prices, demand elasticity and production reduction are potential positive catalysts, and it is recommended to pay attention to two potential inflection points in the memory market, the first is the rebound in demand, and the second is the further deterioration of the memory market and the subsequent production reduction.
Previously, investment institutions such as Citi Securities and Morgan Stanley Securities have also warned that due to weak demand, memory prices will decline more rapidly in the second half of the year.
Citi Securities analyst Peter Lee expects that companies such as Alphabet, Amazon and Microsoft will not place new orders for DRAM in the second half of the year as companies such as Alphabet, Amazon and Microsoft are digesting inventories. Average selling prices in the fourth quarter are expected to decline 17% from the previous quarter, compared with a previous forecast for a 13% decline. The change was attributed to "near-term persistent macro uncertainty."
Morgan Stanley Securities pointed out that due to weak demand and high inventory levels of manufacturers and clients, the memory supply chain will face huge destocking pressure, resulting in a further decline in prices in the second half of the year, and the severity will be greater than market expectations.
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