Continuous Production Cuts by Memory Manufacturers: When Will Supply and Demand Find Balance?

Due to factors such as high inflation, sluggish demand in the consumer electronics sector, and other influences, the memory market has experienced a downturn. Major manufacturers like Kioxia and Micron began reducing capacity in the fourth quarter of the previous year, and in 2023, Samsung announced its entry into the production reduction trend. However, as market demand continues to weaken, the memory market in 2023 has yet to show signs of recovery, with prices continuing to decline and manufacturers facing operational pressure.

In this context, some memory manufacturers are hoping to stabilize prices and rebalance market supply and demand by continuing to reduce production.

According to reports from Taiwan’s media The Commercial Times,” DRAM manufacturer Nanya Technology is following the footsteps of major players by adjusting production capacity, lowering utilization rates, flexibly adjusting product portfolios and capex, and dynamically adapting to customer demands and market changes to cope with the weak market conditions. It is expected that production capacity will be adjusted dynamically, with reductions of up to 20%.

Previously, TrendForce’s research showed that due to DRAM suppliers initiating production cuts one after another, overall DRAM supply bits have decreased quarter by quarter. Coupled with seasonal demand support, this has eased the pressure on supplier inventories. It is expected that the price decline in the third quarter for DRAM will converge to around 0-5%. However, due to the fact that supplier inventories remain high throughout the year, there is still significant pressure for DRAM prices to bottom out and rebound, with the actual stabilization and recovery likely to occur in 2024.

As for NAND Flash, recent surveys by TrendForce indicate that, in response to the continued weakening demand, Samsung has announced an increase in production cuts starting from September, with reductions mainly focused on processes below 128 layers. Other suppliers are expected to follow suit and expand production cuts in the fourth quarter to accelerate inventory reduction.

As NAND Flash manufacturers expand their production cut efforts, TrendForce estimates that NAND Flash prices in the fourth quarter are expected to remain stable or see a slight increase, with an estimated increase of approximately 0-5%. However, if the upward trend in NAND Flash prices is to continue into 2024, it will still rely on sustained production reductions, as well as the observation of whether Enterprise SSD purchase orders will see a significant resurgence.

(Photo credit: Micron)