"What’s key in the DRAM industry is supply and demand balance. Currently, regardless of Elpida’s delisting and bankruptcy filing, we’re still in over-supply in the DRAM industry," Newman told CNBC.
Newman explained that Elipda’s demise could reduce the current over-supply in the DRAM industry as a result of consolidation.
"Any kind of scenario that takes some of that capacity out of the market through some kind of acquisition such as Micron buying one or two of Elpida’s fabs we believe will lead to supply coming out of the market permanently which will lead to DRAM price recovery," he said.
Newman predicted that the DRAM industry will transition into a profitable oligopoly with only three survivors. "There’s only room in this industry for three competitors. The DRAM industry has not grown on a revenue basis since the '90s, it’s very volatile," he said. "I think the three survivors here are Samsung, Micron , and Hynix—Samsung being the clear leader."
Samsung currently has a 43 percent DRAM market share. It is also a key player in the LCD business. While the Japanese tech industry continues to hollow, Korean manufacturers prosper.
"In LCD, [the Japanese] are continuing to fall behind the clear leaders Samsung and LG Display—the Korean manufacturers," Newman said.
When asked where to invest within the DRAM and LCD industries, Newman said, "Samsung continues to be my top pick."
"[We continue to see] a lot of upside here due to a number of things: the DRAM recovery is driving a lot of EPS growth, but also the LCD industry seems to be recovering and smart phones [are] a big driver of their profit."
"Secondly, I would say Micron," Newman added. "Micron is well positioned to have a lot of EPS (earnings per share) growth and recover the stock prices quite significantly over the next year as the DRAM price recovers."