Shulou(Shulou.com)11/24 Report--

On August 23, Nomura released a report that the memory industry is expected to have a more severe hard landing in the near future as market demand is weak, but demand elasticity and production cuts are potential positive catalysts.

Nomura Securities believes that the technology hardware market has entered a severe recession and is deteriorating faster than the overall macro economy. The industry originally benefited from the demand for home work during the epidemic, but as economic activity in various countries reopened, and the war between Russia and Ukraine pushed up inflation and financial burden, the trend of the industry plummeted.

Nomura Securities said that as downstream customers are adjusting inventory, inventory levels of memory manufacturers are rising rapidly, pricing power is also quickly transferred to memory customers, and memory prices are expected to fall further.

Nomura previously expected DRAM / NAND prices to fall by 10-12% in the Q3 quarter, but now expects a quarterly decline of 15%, and Q4 is expected to decline by 15% in the next quarter (compared with a previously expected quarterly decline of 10-12%).

Due to the slowdown in demand, Nomura expects DRAM shipments to grow at an annual rate of 5-10% in 2022, down from the 18% forecast earlier this year and 12% a month ago. NAND demand is expected to grow 15-20% a year, down from 30% forecast earlier this year and 22% a month ago.

Nomura expects memory manufacturers' inventories to reach 8-11 weeks in 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 suggested that attention should be paid to two potential inflection points in the memory market, the first is the rebound in demand, and the second is the production reduction following the further deterioration of the memory market.

Prior to this, Citigroup Securities, Morgan Stanley Securities and other investment institutions have also warned that weak demand will lead to a faster decline in memory prices in the second half of the year.

Peter Lee, an analyst at Citigroup Securities, expects the companies not to place new orders for DRAM in the second half of the year as companies such as Alphabet, Amazon and Microsoft are digesting inventory. Average selling prices are expected to fall 17 per cent in the fourth quarter from the previous quarter, compared with a 13 per cent decline previously expected. This change is due to "continued macro uncertainty in the near future".

Morgan Stanley Securities pointed out that due to weak demand and high inventory levels in manufacturers and clients, the memory supply chain will face tremendous destocking pressure, causing prices to fall further in the second half of the year and will be more severe than the market expected.

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