When asked about the factors driving Micron's hiking of its calendar 2019 outlook for NAND demand growth -- Micron now expects industry-wide NAND bit demand to grow by a low-to-mid 40s percentage, up from prior guidance for mid-30s growth -- Zinser was quick to note the impact of rising smartphone storage capacities in the wake of healthy price declines.
And in line with earnings call comments made by CEO Sanjay Mehrotra, Zinser noted that lower NAND prices are lifting solid-state drive capacities and (in what's a negative for hard drive suppliers) attach rates. He indicated the data center is an area where price elasticity is especially boosting NAND demand.
In addition to hiking its NAND demand guidance, Micron cut its NAND industry supply (output) guidance amid ongoing capital spending cuts, forecasting NAND bit supply will only grow by about 30% this year. For 2020, Micron is guiding for NAND bit demand to grow by a high-20s to low-30s percentage, and for supply growth to be "somewhat below" demand growth.
The disappointing guidance Micron gave at its earnings call resulted in a sharp retracement of its overextension relative to the trend mean. However, that decline is occurring against the background of underperformance this year which has seen the share recoup less than half of last year’s decline.
The Philadelphia Semiconductors Index continues to consolidate above it 2018 range which suggests broad strength in the sector.
Two laggards in the global sector which are now beginning to demonstrate a return to demand dominance are Samsung Electronics and Taiwan Semiconductor. Both have reasonable valuations and market leading positions in their respective fields whether that is memory manufacturing, 5G phones or 7nm chips.