Top memory-chip providers have ample room to raise prices further, but Musk thinks Micron isn't squeezing its customers to an excessive degree
Elon Musk, the CEO of Tesla and SpaceX, has had plenty of praise for Micron Technology, which works with his companies.
Micron Technology is making the "smart move" to retain customers' loyalty by not squeezing them too tightly on prices, according to Elon Musk.
The Tesla (TSLA) and SpaceX (SPCX) CEO late Tuesday praised Micron (MU) for being "reasonable regarding future memory prices." Simultaneously, in a post on X, Musk slammed other sellers for "extortionate" behavior, though he refrained from naming names. Tesla works with Micron.
Memory chips are in high demand across the world as companies like Musk's invest heavily in expanding artificial-intelligence infrastructure. At the same time, sellers of memory chips aren't capable of meeting that demand, with Micron warning of tight supply through 2028.
That has given top memory suppliers - namely Micron, SK Hynix (KR:000660) and Samsung Electronics (KR:005930) - much more pricing power than they previously commanded.
SK Hynix has said it has long-term deals with several customers that are designed to "address price volatility." Samsung's multiyear deals account for between 60% and 70% of its planned capacity, it told investors earlier this year.
About 75% of Micron's fiscal 2027 memory-chip output is already contracted, and new long-term deals are being negotiated at higher prices, according to Mizuho analyst Brett Linzey. Those deals will likely add to the company's historic cash windfall.
In a note to clients on Wednesday, Susquehanna analyst Christopher Rolland wrote that memory prices were up 6.6% in September compared with the prior month, while the time it takes from an order being placed to it being fulfilled continued to increase. Rolland said that demonstrated a positive trend for memory suppliers.
At the same time, it presents a challenge for memory buyers. In July, Tim Cook, then CEO of Apple (AAPL), lamented that his company would have to "pay even higher memory costs" in the future and said that it would be good if there were more than just a few major suppliers of dynamic random-access memory.
"The setup for memory is meaningfully stronger than 90 days ago, with the structural [supply-demand] imbalance deepening and business-model transformation gaining pace," J.P. Morgan analysts led by Harlan Sur wrote in a client note this week.
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Still, Micron and other chip stocks have traded lower recently, partially over concerns related to heightened competition from Chinese rivals.
Some experts, including Musk, have warned that Chinese memory sellers could threaten legacy companies. "When China figures out how to manufacture a product, their ability to scale is often greater than the rest of the world combined," Musk wrote in a post on X on Monday.
ChangXin Memory Technologies recently announced progress in its efforts to make denser chips. Yangtze Memory Technologies is preparing for an initial public offering in China, according to Counterpoint Research, which noted that the company shipped more NAND memory in the second quarter of this year than either Micron or Japan's Kioxia Holdings (JP:285A).
-William Gavin
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