Components | July 16, 2012
1HJul. NAND Flash contract price stabilizes
According to DRAMeXchange, since the beginning of June, to meet system clients’ inventory replenishment demand for certain new products hitting the market in the third quarter, NAND Flash suppliers have been strategically reducing the production ratio of TLC products for the UFD and memory card markets.
Manufacturers are increasing the output ratio of MLC products, the mainstream for system products, to ease oversupply on the memory card and UFD markets, which are currently showing weak demand. Although the memory card and UFD market demand is sluggish, the quarter-end effect for the second quarter has ended and suppliers have experienced profitability cannibalization as prices have continued to fall in the past half year; thus, manufacturers are unwilling to offer aggressively promotional pricing to stimulate sales. Furthermore, suppliers expect demand from some smartphone, tablet PC, and ultrabook clients’ OEM orders will gradually warm in the third quarter. Therefore, average NAND Flash contract price stayed mostly flat in 1HJul., showing a stabilized trend for the first time in 2012. The NAND Flash market will be influenced by the following factors in the third quarter of 2012: 1. Although some eurozone debt issues have seen slight relief recently, global economic recovery is expected to be slow in the second half of 2012, and the traditional peak sales season for electronics in European and U.S. regions will likely not be as strong as in the past. 2. As the release dates for many manufacturers’ new smartphone, tablet PC, and ultrabooks models are set to coincide with the arrival of some new software and hardware components, NAND Flash inventory restocking demand may be delayed and concentrated until late August to early November. 3. In consideration of market demand for the second half of 2012, major NAND Flash suppliers will use launch effects of some new system products to partially make up for weaker than usual peak season sales in the second half of 2012. Some manufacturers plan to slow output pace to ease market oversupply, and may temporarily suspend capacity expansion plans or reallocate a portion of capacity to LSI or DRAM production. Meanwhile, as some makers’ 20nm class process yield still needs to see improvement in the third quarter, 20nm class products will not become the market mainstream process until the fourth quarter of this year, which will help slow the rate of NAND Flash supply growth in the third quarter. 4. Although the large price decline cannibalized NAND Flash suppliers’ profitability in the first half of 2012, it will also spur system product clients to adopt higher-capacity eMMC, mSATA, and SSD products in the second half of the year. As 20nm class process technology gradually matures in the fourth quarter, NAND Flash content per unit will increase in smartphones, tablets, and PCs etc. In summary of the aforementioned market factors, as global economic recovery is progressing slowly, vendors are unable to predict sales performance for new products in the fourth quarter; as a result, system clients’ OEM order visibility is reduced to one to two months. However, manufacturers are slowing the rate of supply growth and most downstream clients’ inventory levels have been decreasing, which will help NAND Flash contract price stabilize in the short term. However, the extent and lasting time of the price rebound will depend on actual market restocking demand in August to October.
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