The latest analysis of the NAND Flash market from TrendForce finds that shipments have been below expectations for consumer electronics such as smartphones, Chromebooks, and TVs during this second half of the year. At the same time, demand remains sluggish for retail storage products including memory cards and USB drives. Data centers and enterprise servers represent the only applications that show relatively strong demand. With the inventory level of the demand side steadily rising, the procurement momentum of NAND Flash buyers will become more constrained going forward. The gradual weakening of demand is also relieving the shortage of NAND Flash controller ICs. Taking account of these factors, TrendForce forecasts that quotes for NAND Flash products will begin to fall in 4Q21, and NAND Flash contract prices will register QoQ declines of 0-5% for that period.

For 4Q21, Contract Prices of Client SSDs Will Drop by 3-8% QoQ, Whereas Contract Prices of Enterprise SSDs Will Rise Slightly by 0-5% QoQ

Countries in North America and Europe are gradually lifting COVID-19 restrictions as their vaccination rates rise. Consequently, schools and businesses in those countries have also reopened and resumed normal operation. Due to this development, the demand for Chromebooks, which are mainly purchased by academic institutions, has started to slide rapidly. The demand for consumer notebook (laptop) computers has slowed down as well. Among different types of notebook computers, only commercial models continue to experience growing demand. On the side of device manufacturers, the shortages of other types of non-memory ICs are disrupting the operations of ODMs. In particular, the prolonged nationwide lockdown in Malaysia has aggravated the undersupply situation for PMICs. This problem not only impacts the production of PCs and notebook computers but also affects the product assembly capacity of some SSD suppliers.

Additionally, NAND Flash suppliers are rapidly raising production capacity for NAND Flash products that are 128 or higher in layer count. As a result, supply is gradually outpacing demand for SSDs. TrendForce believes that suppliers will become increasingly proactive in pricing in order to raise the consumption of their production output by customers and thus prevent excess inventory. Hence, contract prices of client SSDs are forecasted to make a downward turn in 4Q21 and register QoQ declines of 3-8%.

Regarding enterprise SSDs, customers in the data center segment have raised the volumes of their orders for two quarters straight, and their inventories have been climbing steadily as well. Therefore, the demand for enterprise SSDs will start to weaken in 4Q21. The procurement of enterprise SSDs by server OEMs will continue to be sustained by server shipments to medium and small enterprises in 4Q21. However, the total server shipments for the same period will be impacted by the ongoing IC shortage. Server shipments are forecasted to drop by nearly 9% QoQ for 4Q21, and the demand bits related to enterprise SSDs will also fall by 7% QoQ for the same period.

Turning to the supply side of the enterprise SSD market, lead time has been prolonged for the enterprise SSD controller ICs from Intel because Intel’s main base for packaging and testing this kind of chip is located in Malaysia, which is now a COVID-19 hotspot. The situation is not expected to improve in 4Q21, so bit shipments of enterprise SSDs from Intel will shrink from 3Q21. Since Intel’s market share for enterprise SSDs is fairly large, the effect of the recent COVID-19 outbreaks in Malaysia on contract prices of enterprise SSDs will be significant. TrendForce currently forecasts that contract prices of enterprise SSDs will rise by 0-5% QoQ for 4Q21. The hike will be mainly caused by the lack of components on the supply side rather than an increase in demand.

5-10% Reduction Projected for eMMC Prices amidst Significant Drop of End Demand

The demand for major consumer products, such as TVs and tablets, has started to weaken after the conclusion of the traditional peak season of stocking, as well as the gradual withdrawal of subsidization policy from the US. The continuous elevation of the vaccination rate in European and American countries, followed by a progressive mitigation of lockdown measures in various countries and successive resumption of school operations, have yielded an apparent impact to the demand for notebooks and tablets related to education purposes, while the aggravated stocking from the buyers during 1H21 in fear of shortages in NAND Flash controller IC has increased the inventory level and further suppressed eMMC orders. Despite stable capacity for low density 2D MLC NAND, as well as confined supply of NAND Flash controller due to the full load capacity of 28/40nm processes from foundries, the prices have been deprived of support owing to the sizable depletion in end demand, where a prominent decrement of 5-10% is expected for relevant products during 4Q21 after the substantial increase in 2Q21.

0-5% Reduction Projected for UFS Prices amidst Enhanced Supply and Diminished Demand

TrendForce has downward revised the projections to the annual production of smartphones under the fluctuating COVID-19 pandemic status in Southeast Asia. In addition, the stocking demand for new iPhones and flagships of various brands will gradually decelerate upon entering 4Q21, while the peak season of stocking is soon to be transitioned to the imminent off season. Purchase dynamics of UFS are expected to further subside. Regarding supply, mobile clients are currently using similar layers in products to that of PC OEMs after the spontaneous incorporation of 1xxL by different brands during 1Q21, and the provision of products with higher layers is expected to amplify under PC products’ expansion of market satisfaction and the unmitigated component gaps of ODMs. UFS quotations are estimated to deteriorate by 0-5% in 4Q21 under enhanced supply and diminished demand.

NAND Flash Wafer Prices to Sustain the Largest Quarterly Decrease of 10-15% amidst Subsided Demand for Major Applications

The demand performance for retail end products has been sluggish since the beginning of 2021 aside from the temporal nourishment from the related demand for a storage-based cryptocurrency (Chia) between April and May. Memory cards and USB flash drives have been sluggish in sales since 2Q21 due to the successive exacerbation of the pandemic status in India and Southeast Asia, and the sales of retail SSD from channels have been impeded owing to the shortages of graphics cards, which obstructs the bundling with assembled computers. The fluctuation of cryptocurrency prices, for which the plummeting had slightly improved the shortages of graphics cards at one time, has triggered another recovery in the demand for mining, and further inhibits the sales volume of SSD. It is worth noting that the diverted tendency between end products and upstream components has manifested considerable pressure to module houses.

Pressure from the sales of NAND Flash wafer inventory is expected to gradually magnify for suppliers under the worse-than-expected demand for products such as notebooks, smartphones, and TVs. Few suppliers have signaled their willingness in active provision during 4Q21, though the continuously enlarging void of PMIC has instead entangled the shipment of finished enterprise SSD, which intensifies the sales pressure of NAND Flash wafer. Furthermore, YMTC, WDC, and Micron have initiated an active supply of 128, 112, and 176L product samples to module houses for testing and incorporation. The incorporation of higher layers will further refine shipment cost that will obtain additional room in price reduction for suppliers. 3D NAND wafer is expected to sustain the largest depletion among all product categories at 10-15% during 4Q21.

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 suppliers’ Clients in the data center segment were gradually stepping up enterprise SSD procurement after finishing inventory adjustments, according to TrendForce’s latest investigations. Moreover, the adoption rate of 4/8TB products in the enterprise SSD market increased substantially on account of the releases and adoption of the new server processor platforms from Intel and AMD. Although the recent wave of COVID-19 outbreaks that struck Southeast Asia weakened smartphone sales in 2Q21, the quarterly total NAND Flash bit shipments rose by nearly 9% QoQ, as PC OEMs still had plenty of component orders in 2Q21 due to the fairly robust notebook demand during the period. On the other hand, the shortage of controller ICs became more severe during the period, and the winter storm that battered Texas this February affected the operation of Samsung’s foundry fab Line S2 in Austin. As demand for NAND Flash products rose, the overall ASP also rose by nearly 7% QoQ, and the quarterly total NAND Flash revenue rose by 10.8% QoQ to US$16.4 billion in 2Q21.

Moving into 3Q21, clients in the data center segment will gradually become the main growth driver as they expand procurement of high-density enterprise SSDs. Furthermore, notebook demand is expected to remain at a fairly high level in 3Q21, thereby sustaining NAND Flash demand bit growth and the ongoing rise in contract prices of NAND Flash products. Hence, TrendForce currently forecasts that the quarterly total NAND Flash revenue will not only again register a QoQ increase but also hit a record high for 3Q21.

Samsung

For 2Q21, Samsung’s bit shipments grew by around 8% QoQ thanks to the strong demand from PC OEMs and hyperscalers aggressively building up their enterprise SSD inventories. The energetic stock-up activities and the shortage of controller ICs also caused Samsung’s ASP to rise by about 5% QoQ. As a result, Samsung’s NAND Flash revenue went up by 12.5% QoQ to US$5.59 billion in 2Q21.

SK hynix

Smartphone storage solutions account for the largest portion of SK hynix’s sales mix. Nevertheless, SK hynix’s sales performance during 2Q21 still benefitted from hyperscalers’ rising demand and the brisk flow of orders related to notebooks. Hence, SK hynix grew its bit shipments by 3% QoQ. Its ASP also rose by about 8% QoQ because of the general tightening of NAND Flash supply and the shortage of controller ICs. All in all, SK hynix’s NAND Flash revenue went up by 10.8% QoQ to US$2.025 billion for 2Q21.

Kioxia

Kioxia benefitted from strong notebook demand and resurging procurement activities from its enterprise clients in 2Q21. In addition, Kioxia’s major clients in the smartphone segment once again kicked off their NAND Flash procurement during the quarter. As a result, Kioxia’s bit shipment grew by about 7% QoQ in 2Q21, while its ASP entered an upward trajectory for the first time in four quarters with a QoQ growth of more than 10%. However, in light of the trailing performance of its SSSTC subsidiary (formerly Liteon’s SSD business) as well as the impact of unfavorable exchange rates, Kioxia’s revenue for 2Q21, when converted into USD, reached a mere US$3.011 billion, an 8.5% QoQ increase.

Western Digital (WDC)

Western Digital put up a remarkable revenue performance for 2Q21 thanks to robust demand from the notebook segment, an upswing in enterprise SSD demand, and the shipment of its second-gen NVMe enterprise SSD, which resulted in a 39% QoQ increase in Western Digital’s enterprise SSD revenue. On the other hand, while products related to Chia cryptocurrency mining gained significant media spotlight at the end of April, they made limited contributions to Western Digital’s quarterly bit shipment, which underwent a mere 4% QoQ increase in 2Q21, though its ASP increased by 7% QoQ. All in all, Western Digital’s NAND Flash revenue reached US$2.419 billion, an 11.2% QoQ increase, in 2Q21.

Micron

Owing to strong demand from the data center and notebook segments, Micron grew its quarterly bit shipment by nearly 7% in 2Q21. In particular, Micron’s QLC client SSDs enjoyed a growing penetration rate in the PC segment. With the shortage in the SSD market leading to a 3% QoQ increase in Micron’s ASP for 2Q21, its NAND Flash revenue reached US$1.812 billion, a 9.8% QoQ increase.

Intel

Intel’s quarterly bit shipment for 2Q21 underwent a near 10% QoQ decline in spite of strong enterprise SSD demand from the data center segment. This decline can primarily be attributed to the shortage of such key components as controller ICs and PMICs. Compared to other major NAND Flash suppliers, Intel mainly procures some of these components from a single source, thereby exacerbating the impact of the component shortage on its operations, including the shipment of enterprise SSDs. Nevertheless, its ASP still grew by about 9% QoQ on the back of persistently strong demand from clients. Intel’s quarterly revenue from its NAND Flash business reached US$1.098 billion, a 0.8% QoQ decline, in 2Q21.

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

While the server industry transitions to the latest generation of processors based on the x86 platform, the Intel Ice Lake and AMD Milan CPUs entered mass production earlier this year and were shipped to certain customers, such as North American CSPs and telecommunication companies, at a low volume in 1Q21, according to TrendForce’s latest investigations.

These processors are expected to begin seeing widespread adoption in the server market in 3Q21. TrendForce believes that Ice Lake represents a step-up in computing performance from the previous generation due to its higher scalability and support for more memory channels. On the other hand, the new normal that emerged in the post-pandemic era is expected to drive clients in the server sector to partially migrate to the Ice Lake platform, whose share in the server market is expected to surpass 30% in 4Q21.

Volume ramp of CPUs based on the Eagle Stream platform will likely take place in 2Q22, while AMD is expected to reach a 15% share in the server market next year

Regarding the mass production schedule of Intel CPUs based on the next-gen Eagle Stream platform, volume ramp is expected to occur in 2Q22. These processors, which feature embedded HBM, comprise a much more diverse product lineup compared to the previous generation. Although Intel’s 2Q22 target represents a slight delay from the market’s previous expectation of a 4Q21 ramp-up, Eagle Stream CPUs will enter the final product qualification stage at the end of 4Q21, after which Intel will begin provisioning certain leading customers with a small batch of these CPUs in 1Q22, according to TrendForce’s survey of server ODMs. As such, the mass production schedule of Sapphire Rapids will likely resemble the release of Ice Lake server processors earlier this year.

Genoa CPUs, AMD’s competitive equivalent of the Intel Eagle Stream, are expected to enter mass production on a similar schedule, since AMD’s wafer starts at the 5nm node have been relatively low-volume. AMD’s server processors manufactured at the 14nm node and below have the competitive advantage in terms of price-to-performance, core count, and interface support.

Furthermore, after progressing to the 7nm node, these processors have been seeing gradually increased adoption by various public cloud service providers, including Google Cloud Platform, Microsoft Azure, and Tencent, throughout 2021. AMD CPUs have currently surpassed a 10% penetration rate in these three CSPs’ servers. Going forward, AMD will begin inputting wafers at the 5nm node at the end of 2021 in order to further optimize its processors’ cost, power consumption, and performance. TrendForce therefore expects AMD CPUs to reach a 15% share in the global server market in 2022.

While the ARM architecture is starting to gain popularity, ARM chips are mostly built-to-order due to the relatively small scale of client demand

Processors based on the ARM architecture began seeing increased market penetration this year, with AWS’ self-designed Graviton chips enjoying the greatest market share. In addition, Ampere and Marvell have also been releasing more agile and flexible ARM-based server processors, validation for which by CSPs is expected to kick off in 4Q21. The server market, however, is still dominated by x86 processors, which currently account for 97% of total server processor shipments.

In particular, AMD has transitioned most of its server offerings to processors manufactured at the 7nm and 7nm+ nodes by increasing wafer inputs at these nodes and replacing its old 14nm product lineups. This transition has paid off, as some of AMD’s clients have gradually become receptive to these new products. On the other hand, ARM- and RISC-based processors are currently built to order, mostly for the data center market. TrendForce therefore believes that ARM CPUs will not be competitive with x86 CPUs in the server market before 2023.

Support will extend to include PCIe G5 and DDR5 RDIMM, while CXL will improve memory performance

It should be noted that Intel as the dominant leader in the market for x86 server CPUs has decided to have Eagle Stream support CXL (Compute Express Link). This interface further optimizes the memory coherence between the CPU and the memory components to which the CPU is connected. The processor platform thus has the ultimate function of establishing a memory pool for all computing units within the server through memory virtualization, even though this function is not notably emphasized in the initial establishment of the product specifications, which originally sought to enable high-bandwidth and low-latency data transfer for the CPU.

The memory pool, in turn, enhances the interconnections (or the data transfer efficiency) among the CPU, memory, GPU, ASIC, FPGA, etc. The new CXL interface will be able to offer significant improvements in terms of dealing with heavier workload in the future and conducting heterogeneous computing. Moreover, CXL will be able to overcome the limits imposed on the current hardware architecture with respect to data transfer and thereby enable more effective integrated computing capability.

The build-out of data centers continues to grow because of the emergence of applications related to AI and Big Data. Furthermore, the demand for larger cloud storage capacity has massively expanded as a result of enterprises’ increasingly rapid digital transformation efforts in the post-pandemic world. At the same time, with the increase in CPU core count, how to raise computing performance via memory optimization has now become an important issue. Eagle Stream can resolve this bottleneck by extending support to PCIe G5 for the SSD interface technology.

Compared with its predecessor, PCIe G5 offers twice the data transfer rate. Therefore, hyperscalers are eager to adopt SSDs based on this standard. As for DRAM, both Eagle Stream and Genoa extend support to the next-generation DDR5 server DRAM, which delivers a faster data transfer rate, making these new server CPUs superior to Ice Lake in all respects. NAND Flash and DRAM suppliers have made plans to commence mass production of PCIe G5 SSDs and DDR5 RDIMMs at the end of 2Q22 in anticipation of demand generated by the release of the Eagle Stream and Genoa platforms for these next-gen products.

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

（Cover image source: Intel Newsroom）

The ramp-up of the Intel Ice Lake and AMD Milan processors is expected to not only propel growths in server shipment for two consecutive quarters from 2Q21 to 3Q21, but also drive up the share of high-density products in North American hyperscalers’ enterprise SSD purchases, according to TrendForce’s latest investigations. In China, procurement activities by domestic hyperscalers Alibaba and ByteDance are expected to increase on a quarterly basis as well. With the labor force gradually returning to physical offices, enterprises are now placing an increasing number of IT equipment orders, including servers, compared to 1H21. Hence, global enterprise SSD procurement capacity is expected to increase by 7% QoQ in 3Q21. Ongoing shortages in foundry capacities, however, have led to the supply of SSD components lagging behind demand. At the same time, enterprise SSD suppliers are aggressively raising the share of large-density products in their offerings in an attempt to optimize their product lines’ profitability. Taking account of these factors, TrendForce expects contract prices of enterprise SSDs to undergo a staggering 15% QoQ increase for 3Q21.

Looking ahead to 4Q21, TrendForce expects a decline in server shipment to bring about a corresponding downward correction in enterprise SSD procurement capacity. Meanwhile, clients will continue to validate higher-layer PCIe G4 products from Kixoia and Micron. On the other hand, as the shortage of SSD components becomes alleviated going forward, enterprise SSD suppliers’ production capacities will likely increase as well. As a result, enterprise SSD contract prices for 4Q21 will likely remain relatively unchanged from 3Q21 levels.

Suppliers are making a strong push to develop PCIe G5 and CXL products as these new interfaces become available for server applications next year

Intel and AMD are expected to kick off mass production of Eagle Stream and Genoa CPUs, respectively, in 1H22. In addition to being compatible with PCIe G5, these server processors will also support the CXL (Computer Express Link) interface. TrendForce’s investigations indicate that NAND Flash suppliers have been fast-tracking their production of PCIe G5 SSDs in response to the upcoming mass production of Eagle Stream. As such, these SSDs are likely to see market release between 2Q22 and 3Q22.

Micron, on the other hand, has also announced its development of CXL products. Because CXL enables optimized data transmission between CPU and other components, such as memory, GPU, ASIC, and FPGA, memory solutions with CXL interface are likely to experience rapid growth in the hyperscale market, which is constantly in pursuit of faster data transmission speeds. TrendForce believes that the release of increasingly fast data transmission interfaces will bring about a massive increase in the expenses and technological challenges associated with SSD controller IC development. Enterprise SSD suppliers will subsequently have to jostle for market share by leveraging their respective unique competitive advantages.

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

As the Taiwanese IPC (industrial PC) market suffered from deferred orders due to supply chain and logistical disruptions that took place in 1H20, total domestic IPC revenue for 1H20 reached NT$105.4 billion, a 4.7% YoY decrease, according to TrendForce’s latest investigations. However, given that the pandemic was gradually brought under control in 1H21, the market was able to benefit from strong demand from China’s 5G infrastructure rollout, as well as from expanded investments by Europe and the US in public infrastructures such as roads and railways aimed at facilitating an economic recovery. Hence, Taiwan’s IPC revenue for 1H21 reached NT$115.1 billion, a 9.2% YoY increase.

Regarding the financial performances of the top 10 IPC suppliers in Taiwan for 1H21, Ennoconn secured first place with a revenue of NT$42.95 billion, a 16.7% YoY increase. After its acquisition spree that began in 2010, Ennoconn is currently attempting to integrate its various subsidiaries’ technologies and resources in order to make headways in certain emerging technologies, including industrial automation, machine vision, HMI, and cloud services. Going forward, Ennoconn will cultivate its presence in the EV, smart healthcare, and smart retail sectors.

For 1H21, runner-up Advantech posted a revenue of NT$27.37 billion, an 8.2% YoY increase. While Advantech previously favored an acquisition-driven strategy, the company is now expanding into the smart healthcare, smart manufacturing, and smart city sectors primarily through technological partnerships and equity investments. Backed by its WISE-PaaS platform, Advantech continues to expand into the global markets by investing in overseas ISV (independent software vendors) and SI (systems integrators) in the aforementioned sectors.

DFI earned a third-place ranking in 1H21 with a revenue of NT$5.28 billion, a 25.2% YoY increase. After becoming part of the Qisda fleet in 2017, DFI subsequently went on to acquire telecom and information security solutions supplier AEWIN as well as industrial automation vendor Ace Pillar in 2019. These activities culminated in an annual revenue of NT$8.35 billion, an 18.8% YoY increase, for DFI in 2020. DFI currently specializes in smart manufacturing, smart healthcare, and intelligent transportation systems/infrastructures.

AI accelerator suppliers and IPC suppliers work in tandem to clearly define the AI value chain

IPC products have been widely used in AIoT and IIoT applications in recent years due to the proliferation of edge computing. As such, these products have also become the key determinant of how rapidly industries can adopt AI technologies such as machine vision. At the same time, IPC suppliers’ unique position in the mid-stream AI value chain means they are responsible for bridging the gap between upstream AI accelerator suppliers (including Intel, AMD, and Nvidia) and downstream ISV/SI.

With regards to the upstream AI value chain, Intel and AMD acquired independent FPGA suppliers Altera and Xilinx, respectively, in order to achieve more comprehensive heterogeneous computing competencies via horizontal integration. On the other hand, midstream IPC suppliers have been vertically integrating with downstream ISV/SI either independently or collectively through JVs, technological collaborations, strategic alliances, or M&A. For instance, Advantech and ADLINK are now operating on multi-strategy models as well as strategic collaboration models respectively, while Ennoconn and DFI are operating on M&A-oriented models.

On the whole, TrendForce expects that, as AI accelerator suppliers and IPC suppliers push integration forward in the AI value chain, not only will an increasing number of IPC products based on heterogeneous computing platforms be released to market, but emerging AI technologies such as machine vision will also see increased penetration in industrial automation applications. Hence, TrendForce expects annual machine vision revenue to reach US$86 billion in 2025.