TrendForce: NAND Flash Contract Prices Projected to Increase by 3-8% QoQ in 2Q21 Due to Easing of Oversupply
Publish Date :2021/03/17
With Samsung, YMTC, SK Hynix, and Intel leading the charge, NAND Flash
suppliers will maintain an aggressive effort to expand their production
capacities throughout 2Q21, during which NAND Flash bit output will likely
increase by nearly 10% QoQ, according to TrendForce’s latest investigations. On
the other hand, orders from PC OEMs and Chinese smartphone brands since 1Q21, as
well as recovering procurement activities from clients in the data center
segment during 2Q21, will generate upward momentum propelling NAND Flash bit
demand. Furthermore, buyers are actively stocking up on finished products, such
as SSDs and eMMC, due to persistently limited NAND Flash controller supply.
TrendForce therefore expects NAND Flash contract prices to increase by an
average of 3-8% QoQ in 2Q21 after experiencing a 5-10% decline QoQ in 1Q21. In
particular, as Samsung’s Line S2 fab in Austin has yet to resume full operation
after the Texas winter storm, the supply of NAND Flash controllers going forward
may be at risk, and Samsung’s ability to manufacture client SSDs will be further
constrained as a result. In light of these factors, TrendForce is not ruling out
the possibility that NAND Flash contract prices may increase by even more than
current forecasts.
Contract prices of both client SSDs and enterprise SSDs are projected to
rise due to delayed resumption at Samsung’s Line S2 fab
With regards to client SSDs, the persistent stay-at-home economy generated by
the COVID-19 pandemic will likely result in strong demand for notebook computers
in 2H21, while PC OEMs have raised their client SSD inventories as they
manufacture more notebooks to meet demand. Given the high volumes of client SSD
orders from PC OEMs, inventory level of NAND Flash suppliers is therefore likely
to remain healthy. However, the shortage of NAND Flash controllers has yet to be
resolved. Suspended operations at the Line S2 fab disrupted Samsung’s production
of NAND Flash controllers, meaning some client SSD orders will not be fulfilled
in 2Q21. Hence, the tight supply of finished products (i.e., client SSDs) will
be further exacerbated. As such, client SSD contract prices are projected to
increase by 3-8% in 2Q21.
With regards to enterprise SSDs, demand is expected to rebound from rock
bottom in 2Q21, primarily because clients in the data center segment will ramp
up their procurement activities after undergoing a period of inventory
adjustment. In addition, demand for IT equipment from the governmental,
healthcare, and financial services sectors will also gradually emerge. Other
factors contributing to enterprise SSD demand include bids from Chinese telecom
operators and increased IT equipment purchases from small and medium businesses
globally. On the other hand, NAND Flash suppliers are no longer under pressure
to destock via low prices, since their inventory levels have improved thanks to
high demand from notebook manufacturers and smartphone brands. As the overall
demand for NAND Flash rises, enterprise SSD contract prices are in turn expected
to stabilize and experience a 0-5% growth QoQ in 2Q21.
High demand for Chromebooks will provide upward momentum for eMMC quotes,
while contract prices of UFS are projected to undergo the lowest growths among
NAND Flash products
eMMC contract prices will likely remain, for the most part, higher than
expected despite the cyclical downturn in 1H21. In particular, strong demand
from Chromebook manufacturers will provide upward momentum for eMMC quotes.
Likewise, under the influence of NAND Flash controller shortage, eMMC buyers
such as consumer electronics manufacturers will expand their procurement
activities in order to build up their inventories. As a result, the overall eMMC
demand will gradually ramp up in 2Q21. Conversely, the supply of eMMC
controllers is still in shortage due to the fully loaded capacities across the
foundry industry. Also, eMMC products under 32GB exclusively feature 2D NAND or
64L 3D NAND. Because production capacities allocated for these types of NAND
Flash memories have been either reassigned to other 3D NAND products or scaled
down, the oversupply of eMMC has been alleviated, and the long-term price drop
of eMMC has subsequently come to a halt. In the short term, the shortage of
controller ICs will result in a shortage of finished eMMC products. eMMC
contract prices are therefore projected to increase by 3-8% QoQ in 2Q21.
Demand for UFS, which is primarily used for smartphones, is expected to
remain high through 2Q21 because OPPO, Vivo, and Xiaomi have been aggressively
procuring UFS since 4Q20, and Huawei spun off its Honor smartphone business
unit. Buyers have also been anticipating an upcoming shortage of controller ICs
and NAND Flash memory, leading them to build up their UFS inventories and
therefore further driving up the overall UFS demand. On the supply side,
inventory levels of suppliers have dropped significantly due to smartphone
brands’ large-scale procurement activities previously. Although Chinese
smartphone brands have yet to ramp up their bit demand, their existing level of
demand still remains strong. Furthermore, clients from the data center segment
are expected to increase their SSD procurement in 2Q21, and suppliers will
maintain an aggressive approach regarding quotes in response. Even so, because
smartphones account for the highest bit consumption share among all NAND Flash
applications, NAND Flash suppliers are unlikely to significantly adjust their
UFS quotes. As such, UFS contract prices are expected to increase by 0-5% QoQ in
2Q21, which is relatively lower compared to other NAND Flash products.
NAND Flash wafer contract prices are projected to increase by 5-10% QoQ as
NAND Flash suppliers lower their bit shipment to the wafer market due to its
lower profit margins
With regards to the NAND Flash wafer market, TrendForce has yet to observe an
obvious improvement in the retail sales of end products such as SSDs, memory
cards, and USB flash drives. However, as NAND Flash suppliers have been unable
to make their scheduled delivery dates to OEMs due to an insufficient supply of
controller ICs, module makers may stand to benefit from this and obtain more
orders from OEMs, subsequently driving up the demand for NAND Flash wafers
within the next one to two quarters, but the actual procurement of NAND Flash
wafers will depend on whether the tight supply situation of controller ICs can
be alleviated. On the other hand, inventories of NAND Flash suppliers have now
fallen to mostly healthy levels thanks to procurement activities from smartphone
brands since 4Q20. Suppliers have accordingly lowered their bit shipments to the
NAND Flash wafer market (which yields a relatively lower profit margin compared
to other product categories), due to the rising demand from notebook
manufacturers and the expected recovery of the data center segment in 2Q21. On
the whole, given the bullish market of mainstream products, such as smartphones
and notebooks, TrendForce expects NAND Flash wafer contract prices to once again
increase by 5-10% QoQ in 2Q21.
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