According to the DRAMeXchange research division of TrendForce, the DRAM inventory finally returned to a relatively norma...
The following analysis shows TrendForce’s investigations of key component and other downstream technology industries, under the impact of the COVID-19 outbreak...
On the supply side, the June 15 power outage at the Yokkaichi fab jointly operated by Kioxia and WDC forced the two companies to reduce their NAND production, in turn halting the price drop of eMMC/UFS and SSD products in 3Q19. On the other hand, there was a sharp uptick in the wafer market leading to a 20% increase in 3Q19 wafer prices. As well, the contract prices of eMMC/UFS and SSD made a strong recovery in 4Q19.
From the perspective of client-side demand, despite increased contract prices in 4Q19 and the subsequent weakening of bit demand for client SSD, data center clients are actively preparing for new projects in 2020. This has the effect of increasing the momentum for enterprise stock-up demand, which resulted in a supply shortage for enterprise SSD in 4Q19. The contract price of enterprise SSD is thus expected to hold up. Aside from data center clients’ galvanizing of restocking demand, the restocking demand from the mobile devices sector began surging since 4Q19 because of Apple’s new iPhones, to be released in 1H20. The overall demand for NAND Flash in 1Q20 is projected to be strong despite seasonal headwinds.
On the supply front, because the revenue of NAND Flash suppliers reached a break-even point, or even loss, in 2Q19, NAND Flash suppliers reduced their 2020 capital expenditure. As a result, the schedule for NAND Flash production capacity expansion and the 3D layers improvement is relatively conservative compared to previous quarters. Concerning the production capacity planning of NAND Flash suppliers, the bit shipment in 2020 is projected to be an increase of slightly over 30% YoY – the lowest ever planning target. In addition, because of lowered bit shipment in 2019 due to the Yokkaichi power outage, YoY production increase failed to exceed 35% for two consecutive years for the first time. Thus, the 2020 supply and demand of NAND Flash is expected to show a stronger market shortage.
In terms of contract prices, TrendForce asserts that the demand performance of NAND Flash products exceeds off-season expectations, while supply growth appears to be conservative, and suppliers have reduced their inventories. Therefore, contract prices of NAND Flash products are expected to keep rising in 1Q20. On the other hand, because the shortage in client and enterprise SSD supply is more significant than the shortage in eMMC/UFS supply, the price increase of SSD is higher than that of embedded memory products as well. In 2Q20, owing to the increased stock of new smartphones and game consoles and to the upcoming cyclical peak season, the trending price hike is expected to continue.
With regards to wafer contract prices in the channel markets, because of the lower gross margins, suppliers are reducing the 1Q20 allocation to the wafer markets in favor of fulfilling the demand for SSDs, since mainstream SSD products have comparably higher profit. As suppliers’ inventory levels remain healthy, module makers are limited in their ability to negotiate wafer contract prices. As such, 1Q20 prices are expected to rise by more than 10% QoQ – a continuation of the over 10% price increase in late-December 2019.
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