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Micron (NASDAQ: MU) and Samsung (NASDAQOTH: SSNLF) are two of the largest memory chipmakers in the world. The former is considered a "pure play" on the memory chip market, while the latter is a diversified tech giant that also sells mobile devices, consumer electronics, displays, and other components.
Therefore, Micron generally rallies higher than Samsung on soaring memory prices, but takes a bigger hit when those prices decline. That was particularly true this year, when memory prices peaked following a two-year boom. Micron's stock fell nearly 30% over the past six months, while Samsung only lost about 10% of its value.
Image source: Getty Images.
Looking ahead, investors might believe that Samsung is a safer all-around investment than Micron. Let's take a closer look at both companies to see if that's true.
Comparing business models
Micron is the fourth largest maker of NAND chips and the third largest maker of DRAM chips in the world. Samsung is the biggest player in both markets. The companies' main memory chip rivals include Toshiba, Western Digital, and SK Hynix.
Last quarter, Micron generated 70% of its revenue from DRAM sales, 26% from NAND sales, and the rest from other chips. Surging memory prices clearly boosted its revenues in previous quarters, but its top line growth is decelerating as chip prices decline into 2019:
| Q1 2018 | Q2 2018 | Q3 2018 | Q4 2018 | |
|---|---|---|---|---|
| Revenue | $6.8 billion | $7.4 billion | $7.8 billion | $8.4 billion |
| YOY growth | 71% | 58% | 40% | 38% |
Source: Micron quarterly reports.
For the first quarter Micron expects just 16% to 22% sales growth. Analysts expect its revenue to rise just 1% for the full year, compared to 50% growth in 2018. The bulls think Micron can offset declining memory prices by selling more chips for Internet of Things (IoT) devices, but its slowdown indicates that it's still heavily dependent on core markets like PCs, mobile devices, and data centers.
Samsung splits its business into four units: Consumer Electronics (CE), which sells TVs and other appliances; IT & Mobile Communications (IM), which include its smartphones; Device Solutions (DS), which produces memory chips, displays, and other components; and Harman, the audio and connected device maker it acquired last year.
Image source: Samsung.
53% of Samsung's revenue came from the DS unit last quarter, with memory chip sales accounting for 61% of the unit's revenue (or 32% of Samsung's top line). 38% of Samsung's revenue came from the IM business, mostly from sales of mobile devices. 16% of its revenue came from the CE division, and the remaining sliver came from Harman.