Memory And Flash Price Reduction Too Hard For Meguiar To Cut Expenditure By $1.25 Billion To Reduce Supply

Meguiar yesterday released Q1 quarterly results for fiscal year 2009, with revenue of $7.91 billion, a 16% increase over the previous year, gross interest rate of 58%, net profit of $3.29 billion, a 23% increase over the previous year. Although the overall performance is still growing, it has slowed down compared with the last quarter. The main reason is that the price of NAND flash memory has dropped dramatically, and DRAM memory chips have also changed from rising to falling, affecting the company's gross profit rate.

In 2019, the price of memory and flash chips will continue to decline, and the trend is inevitable. For this reason, Meguiar plans to cut capital expenditure by 1.25 billion US dollars and reduce the production of memory and flash chips.

Sanjay Mehrotra, president and CEO of Meguiar, said at the earnings conference that in order to adapt to the current market situation, Meguiar will reduce the production of DRAM memory and NAND flash chips. According to Meguiar's data, they forecast a 15% increase in DRAM memory output in 2019, which is lower than the 20% increase previously predicted, while NAND flash is expected to grow by 35%, which is also lower than the 35-40% growth previously predicted.

Meguiar's capital expenditure for the year was about $9.5 billion, cutting $1.25 billion, mainly by reducing memory chip capacity in markets such as automobiles, smartphones and data centers, where Meguiar believes demand is lower than expected.

For next year's storage market, the general expectation is that it will continue to fall in the first half of 2009. Citigroup analyst Peter Lee expects that next year's memory and flash chip prices will fall sharply, including NAND prices will fall 45%, DRAM prices will fall 30%, and there will be no bottom line before Q2 next year, that is to say, next year's chip prices will continue to fall at least until Q2 quarter.

Metro CEO Sanjay Mehrotra also believes the weak demand in the smartphone market is temporary and expects to pick up in the second half of 2019.

Before Meguiar, Samsung, SK Hynix and other companies also planned to cut capital expenditure next year to reduce NAND flash and DRAM memory capacity. Samsung also planned to increase its share in the wafer maker market to compensate for the loss caused by the price reduction of memory chips.