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)

DRAM Spot Market
Spot prices of chips in the lower price range have started to elevate this week as some NAND Flash suppliers are very committed to raising their spot prices. On the whole, there has been some stabilization of DRAM spot prices, and the overall volume of spot transactions has also increased a bit. Looking ahead in the short term, it remains to be seen whether suppliers’ ongoing production cuts will spur buyers to stock up. However, spot prices are expected to remain mostly flat until the end of this year. The average spot price of the mainstream chips (i.e., DDR4 1Gx8 2666MT/s) rose by 0.28% from US$1.450 last week to US$1.454 this week.

NAND Flash Spot Market

Buyers, concerned over the cessation of low prices, are continuously proposing order inquiries, though they are hesitant towards following up on prices and hoarding inventory during actual transactions. Continuity of transaction dynamics is not apparent in the spot market, where several packaged dies are seeing repeated fluctuations. Compared to the panicked purchases over the past several weeks, buyers have now composed themselves, and are deciding on procurements based on the recovery of demand. Wafer remains as the category with a clearer inflation tendency, where 512Gb TLC wafer spots have climbed 2.02% in the spot market this week, arriving at US$1.620.

In response to persistent softening in demand, Samsung has taken a decisive step: a sweeping 50% production cut from September, with the focus mainly on processes under 128 layers. According to TrendForce‘s research, other suppliers are also expected to follow suit and increase their production cutbacks in the fourth quarter to accelerate inventory reduction. With this maneuver in play, Q4 NAND Flash average prices are projected to either hold firm or witness a mild surge, possibly in the ballpark of 0~5%.

Aligning with TrendForce’s early-year forecasts, NAND Flash prices are poised to rally ahead of DRAM. With mounting losses for NAND Flash vendors and sales prices nearing production costs, suppliers are opting to amplify production cuts to help stabilize and potentially increase prices. Notably, NAND Flash Wafer contract prices kickstarted their revival in August. Given expanding production curtailments, there’s optimism around the resurgence of customer stockpiling, further amplifying price dynamics in September. Yet, for this positive price trajectory to sail smoothly into 2024, a sustained curtailing in production and a robust rebound in enterprise SSD purchase orders are pivotal.

A silver lining for suppliers: Deficit anticipated to shrink, with module makers reaping benefits

While NAND Flash enjoys a nimbleness in pricing over its counterpart, DRAM, 2023 has yet to witness any notable demand upticks. The overshadowing influence of AI servers, especially edging out general-purpose servers, has made the NAND Flash market forecast underwhelming this year. This narrative unfolds with a continuing dip in Q3 average prices and suppliers grappling with widening deficits.

Diving into supplier inventory levels, TrendForce casts its gaze on Samsung. If the hope is for end-users to ramp up stockpiling to slash inventory by year-end, it might be wishful thinking. Instead, the real game-changer is stringent production control. Samsung’s aggressive production cuts are likely to set off a ripple effect: a potential price uplift for their primary products. This ripple is anticipated to propel the overall bit shipment volume of NAND Flash in Q4, gradually narrowing the deficit gap for suppliers. Simultaneously, this shift will likely improve the profit outlook for module makers.

For more information on reports and market data from TrendForce’s Department of Semiconductor Research, please click here, or email Ms. Latte Chung from the Sales Department at lattechung@trendforce.com

DRAM Spot Market
Compared with last week, transaction prices in the spot market have generally stopped falling, but there is no sustained upward momentum. Although suppliers and other spot sellers have been firm on prices and are unwilling to make further concessions, the overall transaction volume has continued to shrink because there has been no turnaround in the demand for end products. Further observations are needed to determine the trajectory of spot prices in the future. Nevertheless, TrendForce believes that suppliers will need to further expand the scale of their production cuts in 4Q23 in order to effectively reduce their existing inventories. The average spot price of mainstream chips (i.e., DDR4 1Gx8 2666MT/s) dropped by 0.07% from US$1.451 last week to US$1.450 this week.

NAND Flash Spot Market
Concluded prices have largely leveled to that of last week without dynamics for ongoing increment. Buyers, despite active stocking behaviors seen recently, are no longer following up on prices aggressively under the yet-to-be-improved level of actual end demand. Subsequent spot price trends will require further observation, though TrendForce believes that NAND Flash suppliers would be forced to expand production cuts during 4Q23 so as to further abate their existing inventory. 512Gb TLC wafer spots have risen by 0.63% this week, arriving at US$1.588.

According to a report from Taiwan’s TechNews, the NAND Flash industry is gradually recovering in pricing as suppliers continue to reduce production. However, achieving a healthy market balance in terms of supply, demand, and pricing is expected to require more time and effort.

Regarding the memory market situation, TrendForce indicates that the reduction strategies for DRAM and NAND Flash by memory manufacturers are expected to continue into 2024. This is especially evident for the heavily loss-making NAND Flash segment. Despite TrendForce’s projection that visibility into consumer electronics market demand for the first half of 2024 remains uncertain, and with general server capital expenditures still weakened by AI server displacement, the memory market is anticipated to exhibit relatively weak demand.

Yet, TrendForce states, due to the low base in 2023 and certain memory product prices having reached comparatively low levels, DRAM and NAND Flash are forecasted to experience year-over-year growth rates of 13% and 16%, respectively.

On the other hand, even with demand picking up, effectively destocking and restoring supply-demand equilibrium in 2024 hinges on suppliers exercising restraint over production capacity. Once suppliers manage their production capacity appropriately, there’s a possibility for a rebound in the average memory prices.

Nomura Securities notes in their report that since late August 2023, NAND Flash prices have seen double-digit increases. This has largely resulted from the escalating scale of NAND Flash production cuts and the downstream inventory for smartphones and related components being low. Additionally, different brands have been launching new products over the past few months.

Citigroup’s recent update on global memory average selling price outlook reveals significant reductions in production volumes, including major memory manufacturers like Samsung. Memory manufacturers are expected to prevent further decline in memory average prices through substantial production cuts, as further decline could threaten the cash cost level of NAND Flash. Therefore, Samsung’s meaningful reduction in memory product production is expected to contribute to stabilizing the average memory selling price in 2023 and laying the groundwork for a stable recovery in the average memory market selling price throughout 2024.