High Cloud demand and a rebounding enterprise market will keep supplies tight this year.
US memory maker Micron sees the chronic shortage of DRAM in the market to continue throughout this year – and that is good for business, according to Micron CFO David Zinsner.
In fact, the company has updated its forecasts to paint an even rosier picture based on an expected shortage of memory available in the market this year.
Specifically, Micron increased its forecast for gross margin this quarter to a range of 32% to 33%, from a previous forecast of 30% to 32%, according to Barron’s.
The updated forecast overshadowed and appearance by Micron CFO David Zinsner at a virtual technology conference hosted by Morgan Stanley.
Navigating a “really tight” DRAM market
In his appearance at the Morgan Stanley event this week, Zinsner said the company saw better-than-anticipated volumes and average pricing for DRAM. He noted that DRAM accounts for about two-thirds of the company’s business.
He also said NAND volumes were running ahead of expectations, however their pricing seemed to be following their previous internal forecasts.
Zinsner notes that supplies are “really tight,” particularly in DRAM. He adds that the company has lower inventories than in recent quarters. Tight supplies continue across the industry, he said, and this “bodes well” for DRAM pricing.
Demand is coming back in the wake of COVID
Asked about end demand, Zinsner said the company is seeing strength in many sectors. These include mobile devices, cloud, notebook computers, graphics applications, as well as automotive and industrial.
Strength is appearing “pretty much every end market we sell into,” Zinsner says. He added that even enterprise demand is starting to rebound. This sector had lagged for the past quarters due to the COVID-19 pandemic.
“Things are certainly challenging in terms of the tightness around really DRAM, but also, quite honestly, a bit on NAND,” he said. Zinsner said that other manufacturers are facing the same challenges, exacerbated by the especially high demand from cloud customers.
Still, Micron stands to benefit from the tight market. The company made 70 per cent of its Q1 2021 revenue from DRAM, thanks to higher average prices and healthier margins resulting from the market shortage.