© verticalarray dreamstime.com Analysis | March 13, 2014
NAND Flash: End demand hits low point in 1H14
NAND Flash suppliers are forced to employ aggressive pricing strategies as the main system OEM clients continue to reduce their orders during the off-peak quarter, according to DRAMeXchange, a research division of TrendForce.
In February alone, the NAND Flash contract prices dropped by nearly 14% compared to the previous month. Looking at the situation for March and April, as the demand momentum is expected to remain sluggish throughout 1H’14, the oversupply situation in the market will likely persist even as the NAND Flash suppliers begin halting their expansion efforts. This may cause chip prices to weaken even further in the coming periods. Looking at the supply side, with the industry’s strategic focus centered on minimizing the effects of the off-peak quarter, major NAND Flash manufacturers such as Samsung and Toshiba have begun to decelerate the pace of their capacity expansions. Even though Samsung’s Xian plant has officially begun its operations in 1Q14, its yield rate is still in need of improvement during the initial stages. The client verification and approval process for the plant’s 3D NAND Flash products, additionally, are expected to take longer than anticipated to complete. Taking into account the aforementioned factors, the company’s impact on the NAND Flash market’s supply and demand is unlikely to be very significant this year. Looking at Toshiba, as the second phase of its fab 5 construction is anticipated to be completed during 3Q14, the trial productions of its advanced 3D NAND Flash products may begin as early as 4Q14. SK Hynix is currently in the process of restoring its NAND Flash production following the Wuxi Plant’s recovery from its fire accident, and may be able to return its NAND Flash output to pre-fire accident levels during 2Q14. With regard to Micron, as its Singapore tech plant is about to complete the transition from DRAM to NAND Flash, the company will likely be able to utilize its NAND Flash capacity fully in Q2. Given Samsung’s and Toshiba’s conservative behavior in the market, the NAND Flash industry’s Q1 bit supply is expected to grow by only 6% compared to the previous quarter. In 1Q14, the shipments of smartphones, notebooks, and tablets are expected to experience a QoQ decline of 5.3%, 12%, and 27%, respectively. Given that Apple’s peak shipments are not expected to take place until the company releases its new smartphones and tablets in 3Q14, and considering how other vendors are looking to unveil their new products during the same period, the NAND Flash demand momentum can be expected to remain relatively sluggish throughout the first half of 2014. For the entire 1Q14, TrendForce predicts the bit demand growth to be only 1.1% QoQ. Taking into account the supply and demand-related developments mentioned earlier and the conservative attitude displayed during the off-peak quarter, Trendforce predicts that the NAND Flash market’s oversupply situation and the price downtrend will continue until 3Q14.
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