Summary
The semiconductor market (excluding NAND and DRAM) tends to behave relatively well, with mild soft spots and less remarkable highs. Add the schizophrenia endemic to memories and the whole complexion of the market changes to one of wild mood swings. Objective Analysis finds that the semiconductor market without DRAM and NAND is a more sedate haven for investors, but those with a flair for adventure may well choose to try and out-guess the DRAM and NAND markets to make a killing overnight.
Analysis
Every month, when the Semiconductor Industry Association (the US lobby for the semiconductor industry) announces the World Semiconductor Trade Statistics (WSTS) a side mention is always made about the DRAM market. Lately NAND has also taken a place alongside DRAM. These mentions necessarily tell what the market would have done had DRAM and NAND not been included - Why is that???
To put it simply, DRAM and NAND are a commodity's commodity. There is so little differentiation between one company's product and the next that all decisions are based upon price and availability. When availability is high, prices collapse. When availability is scarce, prices stabilize, and sometimes even increase.
It is no big surprise, then, that the same companies that make DRAM also make NAND. Samsung, Hynix, and Micron are leading NAND and DRAM makers. Toshiba used to make DRAM, but is now focused on NAND with their partner SanDisk. Intel is in NAND with Micron, but this is a strategic play since Intel believes that the PC of the future relies upon NAND to achieve necessary performance improvements. SanDisk is in NAND as a captive source for its cards. This leaves a few DRAM-only companies, like Qimonda (Infineon's spin-off) Elpida, Powerchip, ProMOS, Nanya, and certain smaller firms as DRAM-only companies.
All of these companies focus enormous resources on cost management, and sell their products at market prices, hoping that their cost structure teams up with the vagaries of market pricing to leave them some scant margin at the end of the day.
Interestingly enough, demand for these products rarely slackens. The last two demand-driven slowdowns were in 1986 and 2001. Given that demand is so consistent, it is clear that the amazing upswings and downturns in the DRAM and NAND markets come solely from the fact that prices either flatten or crash, based simply upon the existence of a shortage or a glut.
To gain a deep understanding of the market we recommend an Objective Analysis report: Understanding the NAND Market, which can be purchased at http://www.Objective-Analysis.com/Reports
