Chip Stock Investor: Investing in Memory IDMs

Introduction

• Focus on integrated device manufacturers (IDMs) in the semiconductor industry, specifically the memory chip market in 2025.
• Key points to cover:
  1. How memory chip IDMs make money.
  2. The role of memory in the AI era and its investment potential.
  3. Current trends and changes in the memory market.

Integrated Device Manufacturers (IDMs)

• IDMs like Intel and Micron traditionally handle engineering, manufacturing, and sales of chips.
• As the industry evolved, specialization increased, leading to disaggregation.
• Memory IDM sales projected to be $185 billion in 2025, with growth from 2024.

How IDMs Make Money

• IDMs design, manufacture, and sell chips to product partners.
• Some IDMs focus on off-the-shelf products, others on custom engineering.
• Barriers to entry:
  • Medium to high due to the complexity and cost of establishing a manufacturing facility.
  • High because of the IP acquisition, engineering, and equipment costs.

Memory as a Commodity

• Storage, a main part of computing systems, often seen as a commodity.
• Memory IDMs produce commodities, which impacts their competitive moat and long-term investment potential.
• DRAM market is the largest memory market, with players like SK Hynix, Micron, and Samsung leading.
• High Bandwidth Memory (HBM) highlighted for its role in accelerated computing GPUs.

NAND Memory

• Differentiated from DRAM by its use for long-term storage.
• Manufactured differently, with layers of silicon creating data-storing cells.
• Key players: SK Hynix, Samsung, Micron, Kioxia, SanDisk, and Yangtze Memory Technologies.

Cyclicality in the Memory Market

• Memory market is cyclical, affecting revenue and profitability.
• SK Hynix and Samsung's financials illustrate cyclical revenue patterns.
• Micron epitomizes cyclicality, with profitable years followed by losses.

Recent Developments

• NAND company IPOs (Kioxia and SanDisk) and potential mergers.
• Technological innovations like High Bandwidth Flash (HBF) proposed by SanDisk.
• HDD market dominated by Seagate and Western Digital, but generally advised to avoid due to revenue instability.

Investing in the Memory Market

• Other investment avenues outside of memory IDMs:
  • Chip fabs, assembly equipment, fabless chip designers, EDA, and IP companies.
• IP in semiconductors is an underrated investment area worth exploring.

Conclusion

• Memory remains a commodity, but ongoing developments could influence future landscapes.
• For more in-depth exploration, visit Semiconductor Insider and subscribe to Chip Stock Investor for updates.