More Consolidation Predicted in DRAM and NAND Markets

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There may be more upside in the semiconductor segment of technology. Analysts Vijay Rakesh and Troy Cowdrey of Sterne Agee see more upside with memory consolidation and opportunities to gain market share. The move could be an added boom for SanDisk Corp. (NASDAQ: SNDK) and Micron Technology Inc. (NASDAQ: MU).

The analysts believe third-party merchant retail distributors like Kingston, Ramaxel and others did roughly $7 billion NAND-DRAM retail revenues in 2013. They feel that as NAND-DRAM supply gets tighter it is a significant incremental opportunity for Micron and for SanDisk to capture more retail share.

What stood out for growth in SanDisk was that it is believed to have grown retail revenues by about 100% from 2009 to 2013, but elsewhere the third-party retail distribution market revenue was flattish in that period. While this already points to market share gains by SanDisk and Micron, the analysts still think there is upside in that $7 billion retail distribution opportunity.

Rakesh and Cowdrey believe that SanDisk did around $2 billion in revenues in retail in 2013, with around $500 million in retail revenues from Micron via Crucial and Lexar.

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A boost ahead is that the number of DRAM-NAND suppliers is down 60% from 2009 to 2013. And on retail market share gains via consolidation, the team showed that number one Kingston has about 50% of the $7 billion retail market, and number two Ramaxel Technology, the largest memory retail distributor in China, has about 6.5% market share and a fragmented market. It also noted that number four in the market, Smart Modular, was acquired by SanDisk in 2013.

As far as consolidation in the NAND segment, the industry will continue to focus on an integration of the supply chain and potentially acquiring memory module distributors. As a reminder, this total market opportunity in retail is listed as more than 300,000 store fronts, and the emerging “third platform” via the Internet of Things will bring a broad commercial strategy.

Does this mean more mergers are coming in the DRAM and NAND space? Both Micron and SanDisk stocks have risen sharply. SanDisk shares are up well over 50% from the lows of the past year, and its shares were up 30% year to date. Micron shares are up 20% year to date, but the stock more than doubled over the past year.

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