On October 30th, major memory manufacturer Western Digital unveiled its financial results for the first quarter of 2024. During this quarter, the company achieved revenue of $2.75 billion, marking a 3% increase compared to the previous quarter but a 26% decrease compared to the same period last year.

The Potential for Sustained Growth in the Cloud Market

Taking a closer look at end-market dynamics in this quarter, flash memory prices continued to decline, but a surge in product shipments drove quarterly growth in specific business segments.

Western Digital’s cloud business revenue was $872 million, accounting for 32% of total revenue, with a 12% quarterly decrease and a significant 52% annual drop. On client revenue, revenue reached $1.147 billion, comprising 42% of total revenue, showing an 11% quarterly growth but a 7% annual decrease. Consumer revenue stood at $731 million, constituting 26% of total revenue, with a 14% quarterly increase and an 8% annual increase.

Looking forward, Western Digital expects its Q2F24 to range from $2.85 billion to $3.05 billion.

Western Digital’s CEO, David Goeckeler, credited the Q1F24 to the team’s dedication. He said, “Our ability to develop differentiated and innovative products across a broad range of end markets has resulted in sequential margin improvement across both flash and HDD businesses.”

Goeckeler also noted that consumer and client markets continue to perform well, and the cloud market is expected to sustain growth. As market conditions improve, Western Digital’s refined cost structure empowers the company to leverage enhanced profitability.

Data from TrendForce, as of September 12th, places Western Digital fourth in the global NAND Flash market for Q2 2023, with a market share of 14.7%. This positions the company closely behind industry giants like Samsung Electronics, Kioxia, and SK Group.

Regarding the merger with Kioxia, media reports suggest that Western Digital, following stalled negotiations, plans to divest its flash memory business, accompanied by a new round of financing to address part of its debt. This strategic separation allows the company to maintain its traditional hard drive business and create two distinct publicly traded entities.

Goeckeler also explained, “However, given current constraints, it has become clearer to the board in recent weeks that delivering a stand-alone separation is the right next step in the evolution of Western Digital.”

Is the Storage Industry Poised for a Revival?

The storage industry has been facing a period of stagnation due to economic challenges and sluggish demand in the consumer electronics sector. Major players in the storage market, including Western Digital, Micron, Samsung, and Kioxia, have been compelled to reduce production and investments to address the issue of oversupply.

However, recent reports indicate that memory chip prices are set to experience a significant upturn in the fourth quarter of the challenging year 2023. Experts suggest that the industry is gradually moving towards a phase of growth.

In terms of pricing, TrendForce forecasts a general price increase in both DRAM and NAND Flash products, starting in the Q4. For DRAM, a seasonal price increase of approximately 3-8% is expected. The sustainability of this upward trend will depend on suppliers’ commitment to production reduction strategies and the extent of demand recovery, particularly in the general server domain.

As for NAND Flash, TrendForce anticipates a comprehensive price increase of around 8-13% in the fourth quarter. Looking forward to 2024, the continuation of this upward trend for NAND Flash may face challenges unless original manufacturers maintain production reduction strategies and demand for Enterprise SSDs in the server domain experiences a revival.
(Image: Western Digital)

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• Q2 NAND Flash Revenue Up 7.4%, Anticipated to Exceed 3% Growth in Q3, Says TrendForce
• NAND Flash Prices Expected to Stabilize and Rebound in Q4, Projected to Remain Steady or Increase 0-5%, Says TrendForce

According to Reuter’s report, the merger negotiations between Western Digital and Japan’s Kioxia Holdings have been terminated as the two companies could not reach an agreement on the terms. This potential merger aimed to create one of the largest memory chip manufacturers globally but faced obstacles in its path.

Notably, South Korea’s SK Hynix, a significant investor in Kioxia, expressed its opposition to the deal, citing concerns about its impact on investment asset value.

TrendForce’s Insights:

While the merger talks between Western Digital and Kioxia faced obstacles, primarily involving a major shareholder, SK Hynix, and disagreements over the acquisition price, it is still anticipated that such acquisitions will eventually materialize. This expectation is rooted in the broader context of the NAND Flash industry.

NAND Flash global demand has seen a decline in its growth rate, shifting from approximately 30% before 2020 to around 20% in recent years. Furthermore, TrendForce’s data reveals that in 2023, all NAND Flash suppliers have experienced their most significant operating losses since 2014. Given these challenges, NAND Flash suppliers are compelled to explore strategies to sustain their competitiveness in a changing industry landscape.

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• After a Low Base Year in 2023, DRAM and NAND Flash Bit Demand Expected to Increase by 13% and 16% Respectively in 2024, Says TrendForce

SK hynix today reported the financial results for the third quarter ended September 30, 2023. The company recorded revenues of 9.066 trillion won, operating losses of 1.792 trillion won and net losses of 2.185 trillion won in the three-month period. The operating and net margins were a negative 20% and 24%, respectively.

After bottoming out in the first quarter, the business has been on a steady recovery track, helped by growing demand for products such as high-performance memory chips, the company said.

“Revenues grew 24%, while operating losses narrowed 38%, compared with the previous quarter, thanks to strong demand for high-performance mobile flagship products and HBM3, a key product for AI applications, and high-capacity DDR5,” the company said, adding that a turnaround of the DRAM business following two quarters of losses is particularly hopeful.

SK hynix attributed the growth in sales to increased shipments of both DRAM and NAND and a rise in the average selling price.

By products, shipments of DRAM increased 20% from the three months earlier, thanks to strong sales of high-performance products for server applications such as the AI with the average selling price also recording a 10% rise. Shipments of NAND also rose with high-capacity mobile products and solid state drive products taking the lead.

Following a turnaround, an improvement in the DRAM business is forecast to gain speed, backed by popularity of the generative AI technology, while there are looming signs of a steady recovery in the NAND space as well.

With the effect of the production reduction by global memory providers starting to be seen and customers, following efforts to reduce inventories, placing new orders now, semiconductor prices are starting to stabilize, the company said.

To meet new demands, SK hynix plans to increase investments in high-value flagship products such as HBM, DDR5, and LPDDR5. The company will increase the share of the products manufactured from the 1anm and 1bnm, the fourth and the fifth generations of the 10nm process, respectively, while increasing investments in HBM and TSV.

(Image: SK hynix)

DRAM Spot Market

The price trend in the spot market has diverged slightly compared with the price trend in the contract price. Spot prices of DRAM chips and modules rose successively over the previous several weeks. However, the upward momentum has lost steam in recent days due to a lack of channel demand. In the case of module house Kingston, it currently holds a high level of DRAM inventory, so its pricing strategy is more conservative compared with other module houses. Also, since Kingston is the leading module house, spot prices of modules on the whole are constrained from climbing further. For now, buyers and sellers in the spot market are taking a wait-and-see approach. The trajectory of spot prices is expected to become clearer following the finalization of prices for 4Q23 contracts. The average spot price of mainstream chips (i.e., DDR4 1Gx8 2666MT/s) rose by 0.71% from US$1.560 last week to US$1.571 this week.

NAND Flash Spot Market

Spot transactions have slightly shrunken recently under insufficient stocks on account of the drastically diminished level of wafer provision from suppliers. On the other hand, buyers who are suppressed in their sentiment of following up with prices, due to the accumulated increment that is already quite significant within the short term, have been relatively restricted in the increase of concluded prices, despite maintaining an upward trend. 512Gb TLC wafer spots have climbed 5.85% this week, arriving at US$2.044.

As the leading global supplier of NAND memory, Samsung is embarking on an ambitious journey to enhance its V-NAND technology, also known as 3D NAND. Early in this week, Samsung has officially declared its commitment to commence mass production of the 9th generation V-NAND memory, featuring an astonishing 300+ layers, by 2024. This achievement will establish a new industry record for the highest number of active layers, solidifying Samsung’s industry leadership.

In a blog post on Samsung Electronics, Jung-Bae Lee, President and Head of Samsung Electronics’ Memory Business, stated, “The ninth-generation V-NAND is well under way for mass production early next year with the industry’s highest layer count based on a double-stack structure.”

Samsung was diligently working on the 9th generation V-NAND back in August this year, preserving the double-stacked technology they first introduced in 2020. Not only is Samsung confirming the trajectory of their next-gen non-volatile memory technology, but it also surpasses competitors by boasting more active layers. It’s been disclosed that SK Hynix’s upcoming 3D NAND will have 321 active layers, Samsung is set to surpass this number.

Jung-Bae Lee further elaborated, “Samsung is also working on the next generation of value-creating technologies, including a new structure that maximizes V-NAND’s input/output (I/O) speed.”

While precise performance details of Samsung’s 9th generation V-NAND remain undisclosed, it will power their upcoming SSDs. In the near future, it is anticipated that Samsung will introduce retail SSDs with the PCIe Gen5 interface, in line with the Samsung 990 Pro series.

Regarding long-term technological advancement, Samsung is committed to minimizing interference between units, reducing device dimensions, and maximizing the count of vertical layers. These innovative strides are clearing the path for Samsung to achieve the industry’s most compact unit size. These endeavors will propel Samsung toward their ambitious goal of developing over 1,000 layers of 3D NAND and distinctive memory solutions, ensuring the continued relevance of their products for data centers, personal computers, and a wide range of applications.

(Image: Samsung)

Read more:

• Memory Spot Price Updates: DRAM and NAND Flash Prices Soaring at Relatively High Levels
• NAND Flash Spot Prices Surge, DRAM Demand Stalls, Spot Prices Remain Volatile in Late September