Memory suppliers are currently carrying a relatively low level of inventory because of aggressive stock-up activities of clients across different application segments in 1H21, according to TrendForce’s latest investigations. More specifically, inventories of DRAM suppliers and NAND Flash suppliers are averaging 3-4 weeks and 4-5 weeks, respectively. The overall procurement of server memory products is expected to intensify in 3Q21, so memory suppliers do not see the necessity in lowering quotes to drive sales. TrendForce forecasts that DRAM prices will rise further by 3-8% QoQ for 3Q21. On the other hand, thanks to the growing demand for enterprise SSDs and NAND Flash wafers, TrendForce has also corrected up the magnitude of the QoQ increase in NAND Flash prices for 3Q21 to 5-10% (compared with the previous projection of 3-8%).

High inventory may pose potential risk for smartphone brands in 2H21 due to decreased smartphone production targets

Under the market spotlight are smartphone brands and notebook manufacturers, which drastically differ in their inventory levels. Regarding the smartphone market, TrendForce has already lowered the YoY growth rate of the global total smartphone production in 2021 to 8.5% from the previous projection of 9.4% as the second wave of the COVID-19 pandemic takes place across India. Presently, smartphone brands are carrying 8-10 weeks of inventory on average for DRAM and NAND Flash. Two newly emerged factors are generating some concerns about the high level of inventory. First, Chinese brands have lowered their production targets and begun to adjust inventories in order to address the issue of component gaps. Second, Southeast Asia is bracing for a resurgence of COVID-19 outbreaks that could disrupt smartphone production and weaken consumer demand.

PC OEMs are holding up to 10 weeks’ worth of DRAM inventory on average; price hike of PC DRAM in 2H21 will likely be limited as a result

Regarding the notebook market, on the other hand, PC OEMs are currently carrying about 8-10 weeks’ worth of DRAM inventory on average, with some PC OEMs having an even higher inventory level, primarily because the stay-at-home economy this year will continue to propel the demand for notebook computers, about 238 million units of which are expected to be produced this year, a 14.3% increase YoY. Furthermore, in view of the shortage of components in the upstream supply chain, including audio CODECs, analog ICs, power ICs, MCUs, and LED drivers, PC OEMs are anticipating that DRAM will be in similar shortage as well, thus potentially leading to an inability to manufacture notebooks. In response, PC OEMs are therefore prompted to expand their DRAM procurement in 1H21. On the NAND Flash front, the persistent shortage of NAND Flash controller ICs means that PC OEMs generally carry about 4-5 weeks’ worth of NAND Flash inventory on average, which is relatively lower than their DRAM inventory.

TrendForce forecasts that Chinese smartphone brands will slow down their procurement of mobile DRAM and NAND Flash solutions during 2H21. However, contract prices of memory products on the whole will unlikely experience a general decline in the second half of the year because demand remains fairly robust in other application segments. On the PC and NB front, changes in the fulfillment rates of components that are in shortage will become the key determinant of how PC OEMs evaluate their inventory of well-stocked components. It should be pointed out that, as PC OEMs have been maintaining a relatively high inventory of DRAM, the increase in PC DRAM prices in 2H21 will be markedly muted as a result.

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

Enterprise SSD procurement has been rising on the back of growing server shipments since 2Q21, according to TrendForce’s latest investigations. In particular, the share of 8TB products in shipments of SSDs to data centers has shown the most noticeable growth, which is expected to persist through 3Q21. However, certain SSD components and parts may be in shortage due to insufficient foundry capacity. TrendForce is therefore revising the QoQ hikes in contract prices of enterprise SSDs for 3Q21 to 10-15% from the previous projection of 5-10%.

TrendForce further indicates that the high demand for enterprise SSDs in 3Q21 is attributed to several factors. First, North American cloud service providers (hyperscalers) have pretty much completed their inventory adjustments and now continue to expand their storage capacity. Second, the flow of incoming orders to traditional server brands is getting stronger over the quarters as government agencies and SMBs increase their budgets for IT infrastructure. Third, Intel and AMD are ramping up production for server CPUs based on their respective new processor platforms. Following the adoption of new CPUs, the overall demand for enterprise SSDs has also shifted to higher-density products because clients want to upgrade their computing power and storage capacity. Specifically, demand is mainly trending toward 4/8TB SSDs since raising NAND Flash density can lower the cost of SSD deployment.

Supply leader Samsung will likely gain control over enterprise SSD pricing in the market

Regarding the supply end, Samsung has a higher flexibility in supplying SSDs compared to the other suppliers because it has a higher share of in-house components for its storage products. Therefore, in view of the possible shortage in certain SSD components, Samsung will likely be able to further expand its market share for enterprise SSDs. Furthermore, Samsung’s products are expected to account for more than 50% of enterprise SSDs (in terms of bits) shipped to data centers in North America in 3Q21. This dominance will likely further Samsung’s ability to dictate market prices going forward.

Intel, on the other hand, has been constrained in its ability to manufacture enterprise SSDs due to a shortage of PMICs. In addition, Intel has mostly been fulfilling orders for QLC products. As a result, Intel’s market share may potentially decrease in the TLC-dominant enterprise SSD sector. Regarding other suppliers including Kioxia and SK Hynix, although they have been able to raise their market shares due to gradual adoption of their products by clients, they are unlikely to catch up to Samsung for the time being.

On the PC client SSD front, at the moment, demand for notebook computers has remained strong, while the supply of SSD controller IC is still relatively tight. TrendForce therefore forecasts a slight 3-8% QoQ increase in client SSD contract prices for 3Q21. Regardless, suppliers will not slow down their process migrations. Starting from 3Q21, 176L PC client SSDs will be available on the market, with a corresponding increase in supply bits in the upstream SSD supply chain.

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

With Samsung, YMTC, SK Hynix, and Intel leading the charge, NAND Flash suppliers will maintain an aggressive effort to expand their production capacities throughout 2Q21, during which NAND Flash bit output will likely increase by nearly 10% QoQ, according to TrendForce’s latest investigations. On the other hand, orders from PC OEMs and Chinese smartphone brands since 1Q21, as well as recovering procurement activities from clients in the data center segment during 2Q21, will generate upward momentum propelling NAND Flash bit demand. Furthermore, buyers are actively stocking up on finished products, such as SSDs and eMMC, due to persistently limited NAND Flash controller supply. TrendForce therefore expects NAND Flash contract prices to increase by an average of 3-8% QoQ in 2Q21 after experiencing a 5-10% decline QoQ in 1Q21. In particular, as Samsung’s Line S2 fab in Austin has yet to resume full operation after the Texas winter storm, the supply of NAND Flash controllers going forward may be at risk, and Samsung’s ability to manufacture client SSDs will be further constrained as a result. In light of these factors, TrendForce is not ruling out the possibility that NAND Flash contract prices may increase by even more than current forecasts.

Contract prices of both client SSDs and enterprise SSDs are projected to rise due to delayed resumption at Samsung’s Line S2 fab

With regards to client SSDs, the persistent stay-at-home economy generated by the COVID-19 pandemic will likely result in strong demand for notebook computers in 2H21, while PC OEMs have raised their client SSD inventories as they manufacture more notebooks to meet demand. Given the high volumes of client SSD orders from PC OEMs, inventory level of NAND Flash suppliers is therefore likely to remain healthy. However, the shortage of NAND Flash controllers has yet to be resolved. Suspended operations at the Line S2 fab disrupted Samsung’s production of NAND Flash controllers, meaning some client SSD orders will not be fulfilled in 2Q21. Hence, the tight supply of finished products (i.e., client SSDs) will be further exacerbated. As such, client SSD contract prices are projected to increase by 3-8% in 2Q21.

With regards to enterprise SSDs, demand is expected to rebound from rock bottom in 2Q21, primarily because clients in the data center segment will ramp up their procurement activities after undergoing a period of inventory adjustment. In addition, demand for IT equipment from the governmental, healthcare, and financial services sectors will also gradually emerge. Other factors contributing to enterprise SSD demand include bids from Chinese telecom operators and increased IT equipment purchases from small and medium businesses globally. On the other hand, NAND Flash suppliers are no longer under pressure to destock via low prices, since their inventory levels have improved thanks to high demand from notebook manufacturers and smartphone brands. As the overall demand for NAND Flash rises, enterprise SSD contract prices are in turn expected to stabilize and experience a 0-5% growth QoQ in 2Q21.

High demand for Chromebooks will provide upward momentum for eMMC quotes, while contract prices of UFS are projected to undergo the lowest growths among NAND Flash products

eMMC contract prices will likely remain, for the most part, higher than expected despite the cyclical downturn in 1H21. In particular, strong demand from Chromebook manufacturers will provide upward momentum for eMMC quotes. Likewise, under the influence of NAND Flash controller shortage, eMMC buyers such as consumer electronics manufacturers will expand their procurement activities in order to build up their inventories. As a result, the overall eMMC demand will gradually ramp up in 2Q21. Conversely, the supply of eMMC controllers is still in shortage due to the fully loaded capacities across the foundry industry. Also, eMMC products under 32GB exclusively feature 2D NAND or 64L 3D NAND. Because production capacities allocated for these types of NAND Flash memories have been either reassigned to other 3D NAND products or scaled down, the oversupply of eMMC has been alleviated, and the long-term price drop of eMMC has subsequently come to a halt. In the short term, the shortage of controller ICs will result in a shortage of finished eMMC products. eMMC contract prices are therefore projected to increase by 3-8% QoQ in 2Q21.

Demand for UFS, which is primarily used for smartphones, is expected to remain high through 2Q21 because OPPO, Vivo, and Xiaomi have been aggressively procuring UFS since 4Q20, and Huawei spun off its Honor smartphone business unit. Buyers have also been anticipating an upcoming shortage of controller ICs and NAND Flash memory, leading them to build up their UFS inventories and therefore further driving up the overall UFS demand. On the supply side, inventory levels of suppliers have dropped significantly due to smartphone brands’ large-scale procurement activities previously. Although Chinese smartphone brands have yet to ramp up their bit demand, their existing level of demand still remains strong. Furthermore, clients from the data center segment are expected to increase their SSD procurement in 2Q21, and suppliers will maintain an aggressive approach regarding quotes in response. Even so, because smartphones account for the highest bit consumption share among all NAND Flash applications, NAND Flash suppliers are unlikely to significantly adjust their UFS quotes. As such, UFS contract prices are expected to increase by 0-5% QoQ in 2Q21, which is relatively lower compared to other NAND Flash products.

NAND Flash wafer contract prices are projected to increase by 5-10% QoQ as NAND Flash suppliers lower their bit shipment to the wafer market due to its lower profit margins

With regards to the NAND Flash wafer market, TrendForce has yet to observe an obvious improvement in the retail sales of end products such as SSDs, memory cards, and USB flash drives. However, as NAND Flash suppliers have been unable to make their scheduled delivery dates to OEMs due to an insufficient supply of controller ICs, module makers may stand to benefit from this and obtain more orders from OEMs, subsequently driving up the demand for NAND Flash wafers within the next one to two quarters, but the actual procurement of NAND Flash wafers will depend on whether the tight supply situation of controller ICs can be alleviated. On the other hand, inventories of NAND Flash suppliers have now fallen to mostly healthy levels thanks to procurement activities from smartphone brands since 4Q20. Suppliers have accordingly lowered their bit shipments to the NAND Flash wafer market (which yields a relatively lower profit margin compared to other product categories), due to the rising demand from notebook manufacturers and the expected recovery of the data center segment in 2Q21. On the whole, given the bullish market of mainstream products, such as smartphones and notebooks, TrendForce expects NAND Flash wafer contract prices to once again increase by 5-10% QoQ 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

Demand for notebook computers is expected to remain strong throughout 2Q21 due to the persisting stay-at-home economy that arose in the wake of the pandemic, according to TrendForce’s latest investigations. In response to the high demand for notebooks, PC OEMs are actively raising a consistent inventory of components, including client SSDs. Nonetheless, client SSDs are now in increasingly tight supply because the preexisting shortage of NAND Flash controllers is now exacerbated by the power outage at Samsung’s Austin-based semiconductor plant. SSD manufacturers are therefore preparing to raise the prices of SSDs. Accordingly, TrendForce has also revised up its forecast of client SSD prices for 2Q21 from “mostly flat” to a 3-8% increase QoQ instead.

As previously mentioned, Samsung’s semiconductor plant in Austin, Texas (here referred as Samsung Austin) was affected operationally by a severe winter storm that blanketed the entire state last month. As a result, production activities at the plant were mostly suspended from mid-February to March 2. TrendForce’s investigation of this incident finds that the plant is starting to recover operationally. Even so, the capacity utilization rate of the whole plant is not expected to return to the level of above 90% until the end of March, and this delay has had a palpable impact on Samsung’s chip production. With regards to product mix, there is no wafer input for NAND Flash at Samsung Austin. Nevertheless, 10% of its production capacity is used to manufacture in-house controller ICs for Samsung’s own branded SSDs. TrendForce’s investigation also finds that most controller ICs made at Samsung Austin are for client SSDs shipped to PC OEMs. In particular, among Samsung’s client SSD offerings, products based on 128L NAND Flash are expected to be directly affected by the incident.

It should be pointed out that, after kicking off mass production of 128L client SSDs in 4Q20, Samsung originally planned to take advantage of the release of Intel’s Tiger Lake CPUs to expand Samsung’s market share of PCIe G4 SSDs through aggressive pricing. After all, its competitors have been slow in ramping up production of PCIe G4 SSDs due to the negative impact of the pandemic and due to the longer-than-expected qualification process from PC OEMs. In light of the shortage of controller ICs, however, all SSD manufacturers are now forced to extend the lead times for their SSD orders, making it difficult for any manufacturer to increase their supply of SSDs and compelling them to in turn raise 2Q21 prices of client SSDs.

On the other hand, the power outage has had an impact on enterprise SSD prices as well, since enterprise SSDs and client SSDs are highly correlated in terms of prices. Furthermore, clients in the data center segment are expected to ramp up their procurement activities for enterprise SSDs in 2Q21 after the previous bearish period, meaning there will likely be successive QoQ increases in the volume of enterprise SSD orders going forward. Enterprise SSD prices are therefore expected to enter an impending upturn, and TrendForce has in turn revised up its forecast of enterprise SSD prices for 2Q21 from a 0-5% decrease QoQ to a 0-5% increase QoQ instead.

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 quarterly total revenue of the NAND Flash industry came to US$14.1 billion in 4Q20, showing a QoQ drop of 2.9%, according to TrendForce’s latest investigations. The total bit shipments of the NAND Flash industry in 4Q20 registered a QoQ increase of nearly 9%. This gain for the most part offset the negative impacts brought about by the QoQ decline of nearly 9% in the overall ASP of NAND Flash products, as well as by the unfavorable exchange rates that impaired some suppliers’ performances. At the same time, clients in the server and data center segments continued their inventory reduction efforts that had begun in 3Q20. Since their procurement drive remained fairly weak, contract prices of NAND Flash products continued their decline as well. However, NAND Flash suppliers were receiving substantial orders from OPPO, Vivo, and Xiaomi. On the whole, the strong demand in the smartphone segment mostly compensated for the weak demand in the server and data center segments. In the notebook computer segment, Chromebook devices were the primary sales driver, but the storage components of most Chromebooks are low-density solutions, meaning related NAND Flash demand is somewhat limited.

Turning to 1Q21 (this quarter), the bit output of the NAND Flash industry continues to grow significantly due to two factors. First, Samsung and YMTC are actively expanding production capacity. Second, all suppliers are eager to migrate to the more advanced stacking process. On the demand side, PC and smartphone brands have kept stocking up on components. However, they have also slightly corrected down their demand as the first quarter is the traditional off-season. As for clients in the server and data center segments, they have yet to restart large-scale procurement even though their inventories have generally returned to a healthy level. As such, during price negotiations, NAND Flash suppliers still expect the oversupply situation in the market to intensify and thereby further drive contract prices of NAND Flash products downward. Therefore, NAND Flash suppliers’ revenues are projected to undergo a QoQ decline in 1Q21.

Samsung

Two factors helped Samsung’s performance in the NAND Flash market during 4Q20. First, Chinese smartphone brands (with the exception of Huawei) continued to aggressively build up their component inventories so as to fight for more market share. Second, PC OEMs released more upside orders than anticipated because of the further demand growth for notebook computers. Samsung’s NAND Flash bit shipments in 4Q20 rose by 7-9% QoQ as a result of the strong procurement momentum in the smartphone and PC segments. However, the ASP of its NAND Flash products dropped by more than 10% QoQ for the same period. Although clients in the data center segment did begin sending out orders for servers and components at that time, their demand was still very limited. As for clients in the enterprise server segment, they were mainly focused on inventory reduction. With the market leaning toward oversupply, Samsung had to lower prices and thereby experienced a revenue decline. Compared with 3Q20, Samsung’s NAND Flash revenue fell by 3.4% to US$4.644 billion.

Regarding production and technology plans, Samsung this year will be the leader among NAND Flash suppliers in raising production capacity. Besides continuing to expand the production capacity of the Xi’an Fab 2, Samsung will also set up a production line for 3D NAND Flash at P2L (in the Pyeongtaek campus). Most of Samsung’s NAND Flash products are still based on the V5 (92L) process at this moment. However, the supplier will significantly raise the output share of NAND Flash from the V6 (128L) process this year. The application of the V6 process technology will expand to more of its offerings for SSDs and UFS solutions.

Kioxia

Following the end of Huawei’s stock-up activities, Kioxia was unable to fully regain the demand for its mobile NAND Flash products through orders from other Chinese smartphone brands in 4Q20. At the same time, the supplier was affected by the weak demand for enterprise SSDs. On the other hand, there were other sources of demand such as notebook computers and game consoles. Consequently, Kioxia’s bit shipments in 4Q20 still registered a small increase. As for the ASP, Kioxia experienced a QoQ decline of 8-10% because of the general oversupply situation. On account of these factors, Kioxia’s NAND Flash revenue slid by 11.4% QoQ to US$2.749 billion for 4Q20.

Regarding production and technology plans, Kioxia will gradually expand the production capacity of K1. As for the construction of new fabs, Kioxia is staying with its plan to begin building Fab 7 in Yokkaichi and K2 in Kitakami in 1Q21. These fabs, which will be producing BiCS6 or more technologically advanced products, are expected to start contributing to the supplier’s output sometime in 2022. Technology migration will also be the main driver of its bit output growth. Currently, the majority of Kioxia’s NAND Flash products are still manufactured with the 96L BiCS4 process. Going forward, the supplier intends to raise the shipment share of 112L BiCS5 products this year.

Western Digital

Western Digital saw the ASP of its NAND Flash products drop by 9% QoQ for 4Q20 as its clients in the server segment were reducing their inventories. On the other hand, the sales of its channel-market products continued to grow, and the robust demand for notebook computers led to an impressive shipment result for its client SSDs. Western Digital’s bit shipments in 4Q20 increased by 7% QoQ. This roughly compensated for the decline in the ASP. All in all, the supplier posted a QoQ drop of just 2.1% in its revenue to US$2.034 billion.

Concerning its activities, Western Digital will be collaborating with Kioxia in the construction of Fab 7 and K2. The additional production capacity from these two plants will help the allied suppliers to deal with market competition in the future. The 96L BiCS4 process will be Western Digital’s primary technology for NAND Flash production this year. Additionally, Western Digital will be providing OEMs with samples of TLC and QLC products that are manufactured with the 112L BiCS5 process sometime between 2Q21 and 3Q21. Western Digital’s next-generation BiCS6 process is also set to enter the production stage in 2022.

SK Hynix

SK Hynix benefited from the aggressive stock-up activities of Chinese smartphone brands in 4Q20. Its bit shipments rose by 8% QoQ, but its ASP also dropped by 8% QoQ due to the general oversupply situation. With the decline in the ASP being canceled out by the increase in bit shipments, SK Hynix kept its NAND Flash revenue relatively constant for 4Q20. It posted a miniscule QoQ decline of 0.2% to US$1.639 billion.

This year, SK Hynix will rely on technology migration as the primary means of increasing bit output. The share of 128L products in its bit output came to around 30% at the end of 2020 and is expected to keep growing to surpass the output shares of 72L and 96L products in 2021. The supplier has also scheduled the launch of its 176L products for 2H21. Regarding the acquisition of Intel’s NAND Flash plant in Dalian, the transfer of the ownership of the plant along with Intel’s SSD assets is expected to be completed by the end of this year as originally planned.

Micron

Thanks to stock-up activities of smartphone brands and the growing demand for QLC SSDs from PC OEMs, Micron posted a significant QoQ increase of 17-20% in its bit shipments for 4Q20. However, like other suppliers, its ASP fell in the same period due to the general oversupply situation and registered a QoQ decline of 10-13%. In terms of revenue, Micron posted a QoQ increase of 2.9% to US$1.574 billion.

On the technology front, Micron has 128L products, but unlike other suppliers’ strategies, Micron will not ship 128L products to its main clients. Instead, Micron is focusing on the development of the second-generation 176L products that will serve as its main offerings in the future. Its clients will thus bypass the 128L process and advance directly to 176L process. OEMs are expected to begin receiving samples of 176L products from Micron in 2Q21 in accordance with the supplier’s schedule. With respect to the cell type, Micron is raising the shipment share of QLC products. Currently, more than 50% of supplier’s NVMe SSD shipments (in bit terms) are QLC products.

Intel

Intel made a recovery in its bit shipments in 4Q20 after inventory adjustments in the data center and enterprise server segments had caused a QoQ decline of nearly 25% in 3Q20. The procurement momentum of its clients was still fairly weak in 4Q20, but it did pick up somewhat compared with the previous quarter. Additionally, the demand from PC OEMs continued to rise. Consequently, Intel’s bit shipments grew by nearly 25% QoQ for 4Q20. Again like other suppliers, Intel saw its ASP drop in 4Q20 because of the general oversupply situation. The QoQ decline came to almost 20%. On balance, Intel’s NAND Flash revenue went up by 4.8% to US$1.208 billion for 4Q20.

Intel will probably not make any significant changes to its existing plans for production capacity and product mix as it has sealed the deal to sell its NAND Flash business to SK Hynix. It will continue to leverage its advantage in the enterprise SSD market to push its clients to adopt 144L products. Regarding the distribution of its product shipments by technology, Intel will be raising shipment share for the 144L stacking process and the QLC architecture. To increase the output of 144L products, Intel will expand the production capacity of the Dalian plant this year. From a long-term perspective, SK Hynix will be the main beneficiary of this capacity expansion effort.

On the whole, TrendForce’s investigations find that PC OEMs have been releasing a substantial amount of upside orders since the start of 1Q21. Although the oversupply situation is worse compared with 4Q20, it has become more moderate than expected. Moreover, the market is anticipating that clients in the data center segment will reinitiate large-scale procurement in 2Q21. The sentiment has thus turned more positive with respect to contract negotiations, and the general price decline has also begun to ease earlier than expected. Suppliers’ sales performances are projected to rebound rapidly 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