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SAMSUNG ELECT LTD(F) (SSNLF), TOSHIBA CORP (TOSBF), Micron Technology, Inc. (MU): Industry Consolidation Calls for DRAM Price Appreciation

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Investors who are following the DRAM industry must be aware of the depression in prices, which have had a harsh effect on DRAM manufacturers. This decline in prices was due to the sluggish PC market. In the DRAM industry, SAMSUNG ELECT LTD(F) (NASDAQOTH:SSNLF), TOSHIBA CORP  (NASDAQOTH:TOSBF) and Micron Technology, Inc. (NASDAQ:MU) are the key manufacturers.
In May, double data rate 2 (DDR2) memory prices dropped down below $2, while the manufacturing cost of DDR2 was in the range of $2.50 to $3.00. It appears that the falling DRAM price trend may be soon coming to an end. Industry consolidation has become a primary theme of the DRAM industry, and it seems to be the only strategy which can slow down the price declines. Micron is one of the more interesting investments in this space. The company is trying to cut production costs to battle ever-declining prices.
Micron Technology, Inc. (NASDAQ:MU)
Micron overview
Micron Technology, Inc. (NASDAQ:MU) is one of the leading manufacturers of semiconductor devices. Its products include DRAM, SSD, DRAM and CMOS image-sensing chips. Micron’s results for the second quarter ended February 2013 included a net loss of $286 million, compared to a net loss of $275 million for the first quarter of 2013. However the company’s gross margin improved to 18%, up 6% over the previous quarter.
Sales of DRAM products improved in the second quarter and were 24% higher compared to the first quarter of 2013. Micron currently generates 10% of its revenue from mobile DRAM. Slow demand and stiff competition have resulted in the reduction of prices, which has impacted Micron’s bottom line. In the second quarter of 2013, due to an increase in NAND flash sales volume, Micron’s revenue from NAND flash products grew by 8% over the previous quarter.
Elpida and mobile DRAM
Micron Technology, Inc. (NASDAQ:MU) is now in the final stage to acquire Elpida, a leading mobile-DRAM manufacturer. This will make Micron the second-largest DRAM manufacturer after SAMSUNG ELECT LTD(F) (NASDAQOTH:SSNLF). Elpida has a strong presence in the mobile-DRAM market. Elpida supplies DRAM chips to Apple Inc. (NASDAQ:AAPL), which could boost Micron’s current DRAM market share. Elpida has a strong brand name in mobile DRAM while Micron provides enterprise DRAM solutions. Consolidation of these two products will strengthen Micron Technology, Inc. (NASDAQ:MU)’s memory market share. It is estimated that the acquisition will constitute a 45% increase in Micron’s total memory capacity.
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