© batman2000-dreamstime.com Analysis | June 18, 2013
NAND Flash: Benefit from recent replenishment momentum
1H'June NAND Flash contract prices have risen by 2-4% following the recent increase in replenishment demand from the OEM customers.
The system OEM clients have been attempting to replenish their inventory since 1H’June as a means to prepare for the upcoming peak quarters and the arrival of new smartphones and tablets. As a result of the rising replenishment demand, the NAND Flash vendors have begun prioritizing the majority of their products for the system OEMs, which in turn limited the amount of NAND Flash parts that are available to the channel customers and, subsequently, caused the supplies in the channel market to tighten. Due in large part to the off-peak quarter effects and the price reduction strategies implemented by various UFD and memory card manufacturers, the shipment and pricing-related pressures encountered by the UFD and memory card markets tended to be more intense in 2Q13 than it was during 1Q13. Concerned that they might be unable to accumulate enough inventory to prepare for 2H13, and believing that the demands as well as prices for the NAND Flash products will continue to rise, the channel customers have taken active measures to ensure that a sufficient amount of inventory is secured for their major clients. Due to the tightened supply and rising demand resulting from the aforementioned events, the NAND Flash contract prices have showed a slight decline in 1H'June compared to 2H'May. Aside from Toshiba, which will begin recovering its previously reduced production output, the other NAND Flash vendors are unlikely to raise their capacity any further during the third quarter. As various manufacturers continue to slow down their transition into the 1xnm manufacturing processes, the 3Q supply growth rate will be expected to end up at somewhere below 10%. On the demand side, given that the earlier mentioned system OEMs are planning to gradually accelerate their replenishment efforts, the demands for eMMC and SSD will both be expected to increase. In the event that this occurs, the UFD and the memory card markets—which are traditionally known to experience sluggish demand—can be expected to rebound during the third quarter. For the memory card products, the sales are expected to improve in 2H13 thanks to the emergence of the non-Apple smartphones and tablets; A similar scenario is anticipated for the UFD market, which will likely benefit from the influence of the traditional peak quarter effects, the growing appeal of the USB 3.0 prices, and the easing price wars among the manufacturers. Compared with the previous quarter, the possibility of there being increased shipment is noticeably higher. Based on recent statistics, demand will likely show a growth of 10% QoQ (due to the consumption of NAND Flash products), whereas starting from the second half of June, the NAND Flash contract prices are likely to be affected by the widening supply-demand gap and will have a good chance of growing even further.
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