Micron’s memory boom: Is the industry’s cyclicality really ending?

In Breaking Analysis 322, we shared with you that our forecast of a $1 trillion silicon business arrived two years earlier than we had forecast. The reason for our 24-month miss was the bottleneck had moved from graphics processing units to memory. Micron Inc. gave us a new datapoint in its third-quarter earnings print. It said DRAM prices rose by more than 60% sequentially in the quarter, while the number of bits shipped barely grew. Today we address what that means. Here’s the key question we ask today: Is this undersupply temporary or is there a structural change in the economics of memory? We believe both forces are at work. This week we participated in a webcast with Micron President and Chief Technology and Products Officer Scott DeBoer. The roadmap he showed us underscores the importance of memory with respect to artificial intelligence performance. New customer take-or-pay agreements Micron has introduced a change how risk is shared. At the same time, customers are being forced to adapt to higher costs. Qualitate’s proprietary research gives us a window into those customer decisions. Our investigation tries to determine whether these changes can make memory less cyclical, and what evidence would tell us…