Neither Samsung nor Micron is prosperous on the market, with memory revenue plummeted by 40%.

Samsung recently has released Q1 quarterly earnings warning information, pointing out that in 2019, Q1 quarterly revenue is about $44.9 billion and operating profit is $5.35 billion, down 60% year-on-year. Its profit decline is related to memory chips and OLED screen business, but the major factor is memory price reduction. Price reduction is expected to fall up to 30% in Q1, which will seriously affect memory chip industry. Besides from Samsung, Micron has similar dilemma. Morgan Stanley, Cowen and other companies has downgraded Micron rating and target share price. This is because high stock of memory chips will greatly weaken Micron’s earnings. Affected by this, Micron’s share price has fallen by 2.75% in recent days.

Together with Morgan Stanley downgrading rating of Micron, Cowen analyst Karl Ackerman also took the same actions and reduced its target stock price from $46 to $45. They thought market competition environment is changing fundamentally and Micron cost advantage in 3D NAND flash is being eroded. In addition, DRAM price drop will also lead to a decline in its earnings in 2020.
Not only the impact on memory price reduction but also 3D NAND flash of Micron was mentioned in Karl Ackerman's report. This report believed that weak cost advantage of Micron by 2020 would contribute to 3D NAND flash lagging behind the industry, which is to limit Micron’s ability to offset price fluctuations caused by imbalances between supply and demand.
In terms of future market, although memory chip manufactures expected it to recover in the second half of this year, Karl Ackerman was not so optimistic. He studied the seven industry cycles and supply chain situation of memory and flash, saying that this trough would last for several quarters. The price of NAND flash and DRAM memory will be improved until Q2 of 2020 as soon as possible.
It’s expected that the average price of memory and flash chips will be reduced by 40% in 2019, and the gross margin on memory chips will fall from 59% in Q1 to 36% in Q4. It is not until 2021 that gross margin will be normalized in 36% to 37%.