NAND Flash: Tightening supply is a key factor

Viewed in terms of the initial prices for each individual months following 3Q12, the 32Gb and 64Gb MLC exhibited larger price increases, whereas the price uptrend for TLC are of a relatively smaller proportion. In the short term, it is anticipated that the NAND Flash market situation may continue to remain stable, with the price uptrend likely to also persist. Analyzing from the supply and demand perspective, the present NAND Flash market is expected to be impacted by the following factors: 1. NAND Flash Supply Perspective: Since Toshiba announced to implement a 30% production cut at the end of July, NAND Flash manufacturers have begun to display a more cautious attitude towards production control in 4Q12. With huge price drops impacting NAND Flash products during 2Q12, many businesses vendors have experienced negative revenue growth, which gradually made the protection of profits a major priority amongst manufacturers. With the memory card and UFD markets yet to show any obvious improvements since early this year, major NAND Flash suppliers have not only increased the proportion of system products, but have also taken the initiative to stabilize prices through the implementation of supply tightening strategies aimed at channel customers. Micron's 4Q12 Financial Report, which covers the period from June to August, shows that its NAND Flash profit growth has reverted from negative to positive, an indication that the supply control strategies are working. Following the impacts and trends from the current economy, it is predicted the capacity expansion plans from manufacturers may either be delayed until next year, or may be decided upon if the demand situation has changed for the better. As such, the attitudes towards the 4Q12 production situation are more conservative than initially expected. TrendForce believes NAND Flash manufacturers are highly likely to continue with the supply tightening strategies during 4Q12. 2. NAND Flash Demand Perspective: The memory card and UFD markets have been sluggish in 3Q, with no clear signs of back-to-school demand nor restocking demand related to China's national holiday. For the fourth quarter, it is predicted that even with Thanksgiving and Christmas shipments, the European and US market's 4Q shipment growth will only be slightly greater than that during 3Q12. The situation and performance of system product OEM clients, on the other hand, appear to be relatively stable. Although major OEM clients remain conservative towards 4Q12 system product demand due to the effects of the overall economy, the steady restocking demand from competitive smartphone brands like Apple and Samsung, along with their requirement for high-standard NAND Flash with greater density, are expected to help the NAND Flash market maintain its stability. On the whole, TrendForce remains cautious about the 4Q12 demand prospects for major system products, memory cards, and UFDs. As NAND Flash manufacturers continue to tighten their NAND Flash resources, the mainstream NAND Flash contract prices, which had been stable during July and August, have shown partial upward trends starting September. TrendForce believes the partially stable and rising trends will likely continue and extend into October.