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.

Driven by forces such as the pandemic, geopolitics, and the digital transformation of everyday life, there has been a shortage of global foundry production capacity for nearly two years and shortages have been especially severe for mature 1Xnm~180nm nodes, according to TrendForce’s investigations. Although all foundries are furiously increasing capital expenditures to expand capacity, unrealized future expansion does not ease existing supply issues. In addition, the uneven distribution of supply chain resources that has exacerbated the shortage of parts and components has yet to be definitively alleviated. Circumstances as a whole will continue affecting shipments of related whole devices. Only the PC category is expected to emerge largely unscathed in 1Q22.

Moving into 1Q22, TrendForce states, due to the limited increase in production capacity, the market’s supply situation is expected to be approximately the same as in 4Q21. However, some end products have entered their traditional off-season cycle and the slowdown in demand momentum is expected to alleviate the immediate pressure on OEMs and ODMs regarding supply chain stocking.

In terms of the whole servers, the FPGA delivery cycle is currently at over 50 weeks at most, while the delivery cycle of Lan chips has improved significantly, from the original 50+ weeks to approximately 40 weeks. However, escalating purchase order activity caused by the uncertainty of the pandemic combined with an accumulated backlog of demand (Back order/backlog) have pushed the SMT capacity of ODMs to full load in general. The aforementioned phenomenon have not only accelerated the consumption of ICs such as FPGA and PMIC, but the demand for additional purchase orders of FPGA, PMIC and MOSFET is still compelling. The overall market remains tight and the production of server motherboards in the future may face hidden issues. TrendForce has ascertained a more crucial matter. Taking the L6 server as an example, its production scale in 1Q22 will be roughly the same as the previous quarter. However, whole server shipments will show a seasonal decline with a decrease of approximately 8% QoQ.

In terms of mobile phones, material shortages have gradually eased from the second half of 2021 partly due to the discretionary adjustment of mobile phone specifications. Mobile phone brands can adjust their specifications and configurations based on available materials. Currently, the supply of four components remains relatively tight. Among them, 4G SoC (30-40 weeks) and OLED DDIC/Touch IC (20-22 weeks) have a significant impact on the market. The former will affect brands that focus on selling 4G mobile phones. The latter is affected by oligopolistic market structure and the adjustment of foundry capacity. Thus, there are rumblings of insufficient supply. Though the supply of the remaining two items, PMIC and A+G Sensor, remains tight, material shortage risk can be largely mitigated through alternative material replacements or the adjustment of specifications and configurations. In terms of production, the 1Q22 supply chain will essentially carry on its performance from the previous quarter. However, due to disappointing holiday demand at the end of 2021, mobile phone brands must adjust the distributed inventory level of finished products in a timely manner. Combined with uncertainty caused by disruptions stemming from a winter-time pandemic, 1Q22 production performance is estimated to fall by approximately 13% QoQ.

In terms of PCs and laptops, starting from November 2021, material shortages have been partially alleviated. Therefore, the shipment volume of PC ODMs in 4Q21 has been revised upwards. Compared with mobile phones and whole servers, the impact of under/oversupply of materials on end PCs and notebooks is relatively minor. Except for the SSD PCIe 3.0 controller, current tightness exhibited in component supply is due to delays in the transition of Intel’s new platform. This temporary shortfall has led to a delivery cycle of approximately 8-12 weeks while any tightness in the supply of Type C IC, WiFi, and PMIC is gradually abating. TrendForce expects that, as overall supply chain stability recuperates, notebook shipments from ODM brands in 1Q22 will only decrease by 5.1% QoQ. However, if the component shortage factor is discounted, subsequent sales originating from various distribution channels will be another major variable TrendForce must consider.

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

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

The Chinese city of Xi’an has been placed under lockdown due to a local outbreak of the Delta variant, although it remains uncertain as to when the lockdown will end, according to TrendForce’s latest investigations. Samsung operates two memory fabs in Xi’an, both of which are responsible for the manufacturing of high-layer count 3D NAND Flash products, and wafer inputs at the two fabs account for 42.5% of Samsung’s total NAND Flash production capacity and 15.3% of the global total. At the moment, the lockdown of the city is not expected to have a notable impact on these fabs.

Nevertheless, the municipal government has been authorized to enforce very severe restrictions on the movements of people and goods in and out of the city during this lockdown. While Samsung has finished arranging most of the memory product shipments for the period from the end of 2021 to middle of January next year, the company could face logistical issues related to the Xi’an lockdown in the near future and experience delays in shipments. Samsung’s clients, in turn, could have difficulties planning their procurement activities because deliveries of memory components are not in accordance with the originally set dates. Additionally, the same logistical issues could cause delays in the deliveries of production-related materials to Samsung’s fabs in Xi’an. However, the fabs have sufficient inventory to continue normal production over the next several months.

On the other hand, Xi’an is a strategically important location for both Samsung’s NAND Flash production and Micron’s memory packaging and testing operations. TrendForce’s investigations indicate that the lockdown will likewise have no impact on Micron’s packaging and testing operations, although potential issues with logistics still remain to be seen. In any case, while memory packaging and testing capacities in Xi’an account for a relatively low share of the company total, the lockdown may potentially affect spot prices of DRAM products in the short run.

Short-term DRAM and NAND Flash spot prices may bump up

In terms of pricing, the spot price of NAND Flash has not fluctuated significantly due to the lockdown event. Both buyers and sellers hold significant inventory in the current spot market. Recent trading volume has been weak and price fluctuations have been small. TrendForce will continue to observe subsequent reactions in the NAND Flash spot market and does not rule out the possibility of a short-term price bump due to the expected psychological impact triggered by the lockdown event.

In terms of NAND Flash contract pricing trends moving forward, since production is unaffected, TrendForce still maintains its original opinion, forecasting that average pricing in 1Q22 will fall by 10-15%. However, because the impact of logistics is difficult to predict, the purchasing side may have to increase orders from other suppliers, further fueling a bargain-seeking mentality. The possibility of seeing a flattening in the amplitude of contract price declines for various NAND Flash products in the first quarter of next year cannot be ruled out.

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