In 4Q21, NAND Flash bit shipments grew by only 3.3% QoQ, a significant decrease from the nearly 10% in 3Q21, according to TrendForce’s investigations. ASP fell by nearly 5% and the overall industry posted revenue of US$18.5 billion, a QoQ decrease of 2.1%. This was primarily due to a decline in the purchase demand of various products and a market shift to oversupply causing a drop in contract prices. In 4Q21, with the exception of enterprise SSD, the supply of which was limited by insufficient upstream components, the prices of other NAND Flash products such as eMMC, UFS, and client SSD, all fell.

TrendForce’s summary of NAND Flash market sales performance in 2021 is as follows: although there have been signs of weakening since 2H21, thanks to remote services and cloud demand driven by the pandemic, revenue performance still grew significantly compared to 2020. Revenue reached US$68.6 billion, up 21.1% YoY, the second-biggest increase since 2018.

NAND Flash revenue fell for most manufactures in 4Q21 due to PC OEM destocking

There were some changes to the top three NAND Flash revenue rankings in 4Q21 compared 3Q21, Samsung and Kioxia remained in the top two while third place was replaced by Western Digital (WDC). Although there was still demand coming from data centers, as PC OEMs continued to deplete client SSD inventories and demand from China’s smartphone market weakened, stocking momentum was affected by component mismatch issues, resulting in a decline of approximately 5% in Samsung Electronics’ bit shipments in 4Q21. After the market shifted to oversupply, ASP also fell by approximately 5%, leading to Samsung Electronics posting 4Q21 revenue of US$6.110 billion, a QoQ decrease of 6.1%.

Second ranked Kioxia continued seeing strong demand from data center clients in 4Q21 but this was offset by inventory adjustment and reduced purchasing on the part of PC OEMs. Bit shipments declined slightly by 1% and ASP remained flat even in the face of weakening market demand, which was better performance than that of other suppliers in the same period. Revenue in 4Q21 reached US$3.543 billion, a QoQ decrease of 2.6%.

WDC was another company that benefited from continued strong stocking demand from major US smartphone clients for new 5G flagship phones which offset the impact of weak client and enterprise SSD sales, for bit shipment growth of 13%. However, as the proportion of consumer goods grew, ASP declined by 6%. WDC’s NAND Flash division posted 4Q21 revenue of US$2.62 billion, a QoQ increase of 5.2%.

Benefiting from continued stocking from data center clients and US-based smartphone brands, SK hynix’s bit shipment growth remained above 10%, in line with original forecasts. However, ASP was affected by weaker mobile phone shipments in China and inventory adjustment at PC OEMs. Pricing fell by nearly 10% which offset overall growth momentum. Revenue posted by SK hynix’s NAND Flash division in 4Q21 increased by 2.8% to US$2.615 billion.

Micron was similarly affected by inventory adjustments undertaken on the part of PC OEMs and data center clients.  Although Micron’s 176-layer products continue to be adopted, shipments in 4Q21 were flat compared to 3Q21 and ASP fell approximately 5% as the growth rate of supply outpaced demand, leading to a decline of 4.7% in Micron’s 4Q21 NAND Flash revenue to US$1.878 billion.

Solidigm’s 4Q21 production capacity was still being affected by the impact of supply chains (such as PMIC supply) on enterprise SSD, resulting in a continued decline in bit shipments of nearly 5% in 4Q21. At the same time, while orders for laptops are still strong, Solidigm actively increased bits shipments of PC QLC SSDs in order to reduce production capacity, causing a drop in ASP and a 4Q21 NAND Flash revenue performance of only US$996 million, a 9.9% decline.

Looking forward to 1Q22, TrendForce states that with the advent of the demand off-season, demand for major applications will show a seasonal decline, exacerbating the phenomenon of oversupply and driving the contract price of products to fall further. Falling prices and shrinking volume is expected to further reduce the revenue level of the NAND Flash industry. Referencing information released by TrendForce on Feb. 10, it is worth noting that market expectant psychological factors in 2Q22 generated from the previous Kioxia and WDC raw material pollution incidents will change the supply and demand situation after February and certain products with additional orders and non-quarterly contract prices will immediately reflect a pricing increase. This will help reduce the decline in the output value of NAND Flash in 1Q22.

WDC recently stated that certain materials were contaminated in late January at NAND Flash production lines in Yokkaichi and Kitakami, Japan which are joint ventures with Kioxia, according to TrendForce’s investigations. Before this incident, TrendForce had forecast that the NAND Flash market will see a slight oversupply the entire year and average price from Q1 to Q2 will face downward pressure. However, the impact of WDC’s material contamination issue is significant and Samsung’s experience during the previous lockdown of Xi’an due to the pandemic has also retarded the magnitude of the NAND Flash price slump.  Therefore, the Q1 price drop will diminish to 5~10%. In addition, according to TrendForce, the combined WDC/Kioxia NAND Flash market share in the 3Q21 was as high as 32.5%. The consequences of this latest incident may push the price of NAND Flash in Q2 to spike 5~10%.

The contaminated products in this incident are concentrated in 3D NAND (BICS) with an initial estimate of 6.5exabytes (approximately 6,500M GB) affected. According to TrendForce, damaged bits account for 13% of the group’s output in 1Q22 and approximately 3% of the total output for the year. The normal production schedule for the entire line has yet to be confirmed. It is worth noting that the damages announced by WDC likely do not account for total losses stemming for this event and the number of damaged Kioxia parts has not been aggregated, so the total number of affected bits may increase further.

Production primarily focused on Client SSD and eMMC, subsequent spot pricing may climb

Currently, WDC and Kioxia are focused on supplying PC client SSD and eMMC products. Since WDC is the number two and number one supplier in the client SSD and eMMC markets, respectively, subsequent supply will inevitably be hampered. Therefore, even if production demand for PC OEM is revised downward in Q2, client SSD prices may remain resistant to decline. In terms of enterprise SSD, Kioxia PCIe 4.0 has been verified by a number of customers and the company’s market share in 2022 was originally forecast to increase. However, this incident will impact Kioxia’s ability to ship product and further affect subsequent customer procurement. Therefore, in order for buyers to satisfy their own production requirements, a Q2 decline in enterprise SSD product pricing will be largely restrained.

In addition, as buyers and sellers in the spot market are still clarifying events and incident assessments, they mostly responded by suspending quotations, with no new quotations having been generated. However, TrendForce’s assessment indicates that subsequent events will obviously stimulate spot price appreciation. Judging from contract pricing, any orders negotiated on a whole quarter basis should be unaffected in the near-term but there may be an immediate price increase in wafer quotations this February and March.

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

NAND Flash prices for 1Q22 are expected to decline by 8-13% QoQ, compared to TrendForce’s previous forecast of 10-15% QoQ, primarily due to PC OEMs’ increased orders for PCIe 3.0 products and the impact of the lockdown in Xi’an on PC OEMs’ price negotiation approaches. To mitigate potential risks in logistics, NAND Flash buyers are now more willing to accept a narrower decline in contract prices in order to obtain their products sooner. However, as the Xi’an lockdown has not noticeably affected the local fabs’ manufacturing operations, the movement of NAND Flash contract prices going forward will likely remain relatively unaffected by the lockdown.

In addition, TrendForce finds that the daily number of new COVID-19 cases in Xi’an has recently undergone a noticeable drop, and the local government has also announced that that the emergency level has been downgraded. As such, Samsung’s and Micron’s local production facilities are returning to normal with respect to workforce and operational capacity. Samsung’s local production base manufactures NAND Flash products, whereas Micron’s local production base is responsible for the testing and packaging of DRAM chips as well as the assembly of DRAM modules. The impacts of the lockdown mainly relate to delays in the deliveries of memory products to customers. On the other hand, the event has not caused a tangible loss in memory production.

Lockdown in Xi’an has not caused a notable rise in NAND Flash spot prices because most spot buyers already carry a high level of inventory

Regarding NAND Flash spot prices, suppliers temporarily suspended quote offering immediately after the event due to concerns about the fallout. As a result, the general decline in NAND Flash spot prices has more or less come to a halt. However, there has been no accompanying signs of spot buyers rushing to procure more products, and the overall transaction volume remains fairly low. TrendForce’s latest survey of the spot market finds that buyers still have plenty of stock on hand and are not in a hurry to procure NAND Flash products at the prices that are currently being offered.

Decline in client SSD and UFS prices for 1Q22 is expected to narrow

Regarding the contract prices of major NAND Flash products, their overall decline has been narrower than previously expected. For instance, despite the weakening demand for Chromebooks, notebook production on the whole has been improving as component gaps become gradually resolved, while demand for commercial notebooks also provides some upward momentum for the overall shipment of notebook computers. As a result, the QoQ decline in notebook shipment for 1Q22 has been narrower compared to prior first quarters. Furthermore, lower-than-expected shipment of Intel’s latest Alder Lake CPUs, which support PCIe 4.0 interface, has led certain PC OEMs to ramp up their orders for PCIe 3.0 SSDs in order to meet their PC shipment targets for 1Q22. However, SSD suppliers have already begun gradually transitioning their material preparation to PCIe 4.0 SSD instead, thereby creating a gap between the supply and demand of PCIe 3.0 SSDs. As well, the Xi’an lockdown has prompted client SSD buyers to scramble to lock in their required delivery volumes. Taken together, these factors have lessened the decline in client SSD prices for 1Q22 from the previous 5-10% QoQ to 3-8% QoQ.

Regarding smartphones, not only has demand remained relatively sluggish, but smartphone brands are also still holding a relatively high level of eMMC/UFS inventory, meaning these brands are not particularly willing to negotiate prices for high volumes of mobile NAND Flash storage at the moment. On the other hand, thanks to increased orders from PC OEMs since November 2021, NAND Flash suppliers’ inventory levels have fallen somewhat. Hence, the decline in mobile NAND Flash storage quotes has in turn narrowed slightly. Contract prices of UFS products are now expected to decrease by 5-10% QoQ in 1Q22 instead of 8-13% QoQ as previously expected. Finally, contract prices of server SSD and NAND Flash wafers are expected to decline by 3-8% QoQ and 10-15% QoQ, respectively, in 1Q22, in line with prior expectations.

An earthquake that was around magnitude 6.0 on the Richter scale occurred off the east coast of Taiwan at 5:46PM local time on January 3, 2022. As most local DRAM and foundry fabs are located in the northern and central parts of the island, TrendForce’s latest investigations reveal no notable damages to the equipment from the fabs. Therefore, the production side is expected to continue normal operation, and the actual impact of the earthquake on the output of Taiwan’s DRAM and foundry industries will likely be limited. Taiwan’s memory fabs, including those operated by MTTW, Nanya, and other smaller semiconductor companies, collectively account for about 21% of the global DRAM production capacity. In the foundry industry, Taiwan’s fabs, including those operated by TSMC, UMC, Vanguard, PSMC, etc., together make up as much as 51% of the global production capacity.

Regarding the current state of the DRAM market, it is in midst of the conventional off-season. However, the recent easing of component gaps in the supply chain is generating some stock-up activities in different application segments and thus bolstering the overall demand. The headwinds of the off-season are not as strong as usual. Also, there are now concerns brewing in the wider memory market about the supply side being affected by the COVID-19 lockdown in the Chinese city of Xi’an. Consequently, memory spot prices have been registering daily hikes lately. It is worth noting that increases in DRAM spot prices have been more significant than the increases in NAND Flash spot prices. Regarding DRAM contract prices, TrendForce for now maintains its original forecast of QoQ drops in the 8-13% range for 1Q22. However, the latest earthquake that struck Taiwan could affect DRAM buyers’ behavior at any time. How contract prices will actually end up is something that requires further observation. As for DRAM spot trading, the memory spot market of Mainland China was still in midst of the year-end holiday on January 3. Hence, spot traders were passive for the most part. TrendForce will continue monitoring the spot market to see if the earthquake is going to be a positive driver going forward.

Turning to the current state of the foundry market, the chip demand related to some categories of end products has slowed down a bit recently because of seasonality. However, demand remains quite strong for chips that were previously in short supply, such as PMIC, Wi-Fi SoC, etc. Foundry fabs on the whole are still operating with a fully loaded capacity because demand continues to outstrip supply. The fabs of Taiwan-based foundries, including TSMC, UMC, PSMC, and Vanguard, are concentrated in Hsinchu, Taichung, and Tainan. In those places, an earthquake intensity scale of 3 or under was recorded. As such, no foundry fab in Taiwan has halted operation because of the earthquake, and all fabs are operating normally at the moment.

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

Currently, the consequences of Xi’an’s lockdown on Samsung is weighted most heavily towards the difficulty of scheduling shifts for personnel, according to TrendForce’s investigations. Due to restrictions on movement and other lockdown measures, Samsung must continue operations with limited manpower. Samsung is currently making active adjustments to reduce impact on output and the local government expects a return to normalcy within one to two weeks. However, if the pandemic is not properly controlled, short-term impact on the production utilization rate of the local factory campus cannot be ruled out, resulting in a slight decline in output. As for raw materials required for production such as water and power, supply seems to remain sufficient, though Samsung is still confirming the specific degree of any impact.

Production has not been interrupted at Samsung’s Xi’an plant, the company’s remedy is reduced operational scale which may affect utilization rate  

Following up on TrendForce’s previous press release, Samsung’s two major NAND Flash fabs in Xi’an are still manufacturing without experiencing significant disruptions at this moment. However, with the local authority enforcing even stricter restrictions on the movements of people, Samsung has been compelled to perform some temporary operational adjustments to the two fabs. With respect to end-products, facilities in the Xi’an region are primarily responsible for the assembly of consumer electronics such as UFS and client SSDs, meaning changes in the Xi’an fabs’ operations will have a direct impact on the procurement activities of smartphone and notebook computer manufacturers. However, as Samsung’s inventory level is still relatively high, the company should be able to keep supplying these products to buyers with no issues in the short run, although the decline in the these products’ prices may moderate somewhat.

Judging by the performance of the NAND Flash spot market on December 29, TrendForce further indicates that most suppliers have now stopped giving price quotes for NAND Flash products after Samsung released an official statement on the Xi’an matter. Regarding the forecast of NAND Flash contract prices for 1Q22, TrendForce will continue to closely monitor responses by Samsung as the pandemic progresses. If the lockdown continues, the decline in NAND Flash contract prices may potentially see a further tapering.

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