AI Spring breeze blows to storage chips, Micron Technology, Western Digital, and Intel become hot cakes

On March 21, Micron Technology (MU), a storage chip company, announced its financial report, with its stock price soaring by 14% and a cumulative increase of 23% over 4 trading days. This indicates a comprehensive recovery in the storage chip market.

On March 26, amidst an overall decline in the semiconductor sector, Micron Technology (MU) and Western Digital (WDC) rose against the trend, with increases of 1.43% and 4.88% respectively.

Micron Technology's Encouraging Financial Report Awakens the Neglected Industry

In FY2024Q2 (23.12~24.2), Micron achieved a revenue of $5.824 billion (previously guided at $5.1~5.5 billion), a year-on-year increase of 58% and a quarter-on-quarter increase of 23%; gross margin was 20% (Non-GAAP, previously guided at 11.5%~14.5%), a year-on-year increase of 51.4 percentage points and a quarter-on-quarter increase of 19.2 percentage points; net profit (Non-GAAP) was $476 million, a year-on-year increase of $2.057 billion and a quarter-on-quarter increase of $1.524 billion, far exceeding expectations and showing a strong recovery.

In terms of guidance, for FY2024Q3, the company is expected to achieve a revenue of $6.4~6.8 billion, with a year-on-year increase of 73.68% and a quarter-on-quarter increase of 13.32%; gross margin is expected to be 25%~28%, with a year-on-year increase of 42.5 percentage points and a quarter-on-quarter increase of 6.5 percentage points, indicating continued optimism. Regarding the HBM product, Micron's HBM3E will supply Nvidia's H200 GPU, which is already in mass production and is expected to drive the company's gross margin level, contributing hundreds of millions of dollars in revenue by 2024. Currently, Micron's HBM for 2024 is already sold out, and the capacity for 2025 is almost fully allocated, with product demand outstripping supply.

Goldman Sachs: HBM Market to Grow Tenfold in Four Years, with SK Hynix Taking Over Half of the Market Share, Micron May Catch Up Later

Goldman Sachs recently released a research report stating that the stronger demand for Generative AI (Gen AI) has driven higher AI server shipments and higher High Bandwidth Memory (HBM) density per GPU, leading to a significant increase in the estimated total market size of HBM. The market size is now expected to grow tenfold from 2022 to 2026 (with a compound annual growth rate of 77% over 4 years), increasing from $23 billion in 2022 to $230 billion in 2026.

HBM, short for High Bandwidth Memory, is a new type of CPU/GPU memory chip. It stacks many DDR chips together and packages them with the GPU, achieving a large capacity and high bandwidth DDR array.

To draw an analogy, traditional DDR uses a "flat design" approach, while HBM uses a "high-rise design" approach, thereby achieving higher performance and bandwidth.

Currently, the HBM market is mainly dominated by SK Hynix, Samsung, and Micron. SK Hynix holds around 50% of the market share.

In 2023, Nvidia signed an HBM supply agreement for 2024 GPUs with SK Hynix and Micron Technology, and paid billions of dollars for itDue to supply shortages, Samsung, Micron, and Intel are all expanding production, with Micron investing $4 billion in Indiana to build a semiconductor factory to increase capacity.

Goldman Sachs believes that compared to its peers, Micron has better productivity and output. Goldman Sachs expects Micron to maintain over 50% market share in the next 2-3 years, thanks to its extensive collaboration experience with major GPU customers (mainly Nvidia) and the company's strong supply chain.

Goldman Sachs reiterated its buy ratings for Micron, Samsung, and Intel. Due to higher HBM market size and memory pricing estimates, Goldman Sachs raised Micron's target price from 185,000 Korean won (approximately $138.75) to 210,000 Korean won (approximately $157.5), and raised Samsung's target price from 95,000 Korean won (approximately $71.25) to 97,000 Korean won (approximately $72.75).

Goldman Sachs expects that higher-than-expected memory pricing will result in operating profits of 19 trillion Korean won (approximately $14 billion) and 58 trillion Korean won (approximately $44 billion) for the two companies, respectively, which is about 20% and 7% higher than consensus estimates.

In addition, SK Hynix stated on Wednesday that this year, HBM used for AI chips will account for a double-digit percentage of its DRAM chip sales.

Looking at the industry as a whole, analysts estimate that the proportion of HBM in DRAM sales this year will increase from 8% last year to 20%, showing rapid growth.

Strong Recovery, Storage Chip Industry to Grow Over 44%

The World Semiconductor Trade Statistics (WSTS) organization released its 2024 semiconductor industry outlook data, showing a strong recovery in the semiconductor market in 2024 with an expected growth of 13.1% after a decline of about 9.4% in 2023. The market size is expected to reach $588.364 billion in 2024.

This expansion is expected to be mainly driven by the storage sector covering applications such as PCs, large data center servers, and smartphones, with the storage sector expected to grow significantly to $130 billion by 2024, an increase of over 44%.

It is worth mentioning that Western Digital (WDC) surged after Micron Technology (MU) announced its financial report, rising by over 11% in 4 trading days.

Micron has seen a nearly 10% increase in the past 5 trading days: