NAND Flash buyers & suppliers fail to reach agreement

By June 30, 2011 6:00 pm, because of discrepancy between the buyers and the suppliers on NAND Flash contract price and following market view, most of the suppliers and memory card customers have not reached an agreement on contract price of NAND Flash chips for June after many negotiations. In addition, by end of June, some customers directly purchased white-box memory card in place of the chips, so DRAMeXchange will wait until the buyers and the suppliers reach an agreement on contract price of NAND Flash chips before mid-July to make announcement about the latest contract price update. Since early June, NAND Flash market has been affected by some market variables, which made price negotiation delay between the buyers and the suppliers. The following are main variables that has recently attracted much attention from the market: 1.) The memory card customers raised inventory level in 1H2Q for concern on shortage of raw materials as caused by the strong Earthquake in Japan. However, in 2H2Q the market demand was short of the expectation, so the high inventory level shall be lowered to the bottom before settlement at end of the quarter. As a result, before the end of June, the enthusiasm for large amount of purchase was not high. The customers only directly purchase the necessary white-box memory cards but not rush to purchase the chips. With the Fujiwhara effect caused by June approaching the end of 2Q and the traditional off-season, the memory card customers are not willing to purchase chips until the suppliers significantly lower their prices. Meanwhile, to maintain profitability, the suppliers are also not willing to reduce the prices. As a result, the two parties have gone through rounds and rounds of Marathon negotiations but without any agreement before the end of June. 2.) Since early June, for the market was worried that Europe, the United Sates and Japan may be disrupted by some uncertain macro-factors, demand for NAND Flash will be lowered as the expectation of the market in 2Q11 & 3Q11. Meanwhile sales of the non-apple tablet PCs was also not as good as expected, which further reduced the OEM demands for the system products. Without clear time frame on re-stocking and getting purchasing orders in later months, the downstream customers will adopt passive strategy by waiting and see in July. 3.) Key NAND Flash suppliers will speed up output of new 2xnm process technologies, and new plants of some NAND Flash makers will also start mass production in 3Q11. As a result, the market supply will also increase accordingly. And the oversupply of NAND Flash in 2Q11 will persist into 3Q11. According to opinions of DRAMeXchange on the above NAND Flash market concerns: 1.) Recent international organizations and major countries are cooperating and negotiating to reasonably address the stagnant economic and political problems at home and in some other regions, and appropriate price correction of some raw material commodity can also help reduce inflation pressure for many countries. As a result, it is expected that in 2H11, the global economy may slowly recover, and the traditional re-stocking in peak season may drive year-end peak demand in 4Q11 through the launch of new products and new models in late 3Q11; 2.) Should recovery of 3Q11 end-application market, some NAND Flash makers will consider slowing down new capacity expansion progress in 2H11. As a result, by comprehensive consideration of the above market variables, DRAMeXchange expects the re-stocking demand of NAND Flash may gradually recover from August, and price downtrend may gradually stop and stabilize in later July. However, the following pricing trend of the NAND Flash market will still depend on the strength of the peak season demand in 2H3Q.