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

After DRAM prices made a rebound into an upward trajectory in 1Q21, buyers expanded their DRAM procurement activities in 2Q21 as they anticipated a further price hike and insufficient supply going forward, according to TrendForce’s latest investigations. Not only was demand robust from clients in the notebook segment, which benefitted from ongoing WFH and distance learning applications, but CSPs also sought to gradually replenish their DRAM inventories. Furthermore, demand for products that are relatively niche, including graphics DRAM and consumer DRAM, remained strong. Hence, DRAM suppliers experienced better-than-expected QoQ increases in their DRAM shipment for 2Q21. At the same time, DRAM quotes grew by a greater magnitude compared to the first quarter as well. With both shipment and quotes undergoing growths in tandem, DRAM suppliers registered remarkable growths in their revenues in 2Q21. Total DRAM revenue for 2Q21 reached US$24.1 billion, a 26% QoQ increase.

However, heading into 3Q21, the issue of mismatched component availability began surfacing in the upstream supply chain and bottlenecking the assembly of electronic devices. Some OEMs/ODMs (especially notebook manufacturers) have therefore scaled down their DRAM procurement due to their relatively high level of DRAM inventory in comparison with other components. As a result, although most DRAM suppliers remain bullish on the market’s future, the growth in demand from certain product segments is likely to slow down, since DRAM buyers still carry ample inventory. In light of suppliers’ insistence on raising quotes, TrendForce expects the overall ASP of DRAM products for 3Q21 to undergo a QoQ increase, albeit at a narrower 3-8% now compared to 2Q21.

DRAM suppliers significantly improved their earnings performances in 2Q21 due to massive price hikes and increased shipment of products manufactured with advanced process technologies

The three dominant suppliers (Samsung, SK hynix, and Micron) of DRAM products put up similar revenue performances for 2Q21 as they saw an increase in both ASP and shipment, with the latter surpassing the suppliers’ expectations. On the demand side, buyers showed an increased willingness to expand DRAM procurement because they anticipated that prices will rise even further. In addition, frequent shortages of various semiconductor components this year drove buyers to stock up on DRAM ahead of time so as to avoid potential manufacturing bottlenecks due to low DRAM inventory. Hence, each of the three suppliers increased its revenue by more than 20% QoQ in 2Q21. Samsung in particular registered the most remarkable growth, at a 30.2% QoQ increase. For 3Q21, these suppliers will not only continue to hike up quotes, but also increase their quarterly shipments by a similar magnitude. TrendForce thus expects their market shares to remain relatively unchanged from the previous quarter.

DRAM suppliers likewise experienced considerable growths in terms of profitability for 2Q21 thanks to the massive increase in DRAM quotes, along with the fact that DRAM products manufactured with advanced process technologies occupied a growing share of the suppliers’ DRAM bit shipment. For instance, while Samsung kicked off mass production with the 1Znm process in 1Q21 at a relatively low yield rate (since the technology was still in its infancy at the time), the company was able to considerably ramp up production in 2Q21, thereby raising its operating profit margin from 34% in 1Q21 to a staggering 46% in 2Q21. SK hynix similarly raised its operating profit margin to 38% in 2Q21 by improving the yield rate of its advanced process technology. Micron, on the other hand, increased its DRAM quotes by a similar magnitude compared to its Korean competitors in 2Q21 (Micron counts the March-May period as its fiscal quarter) and saw a jump in its operating profit margin from 26% in 1Q21 to 37% in 2Q21. Assuming that prices and shipment continue their upward trajectory in 3Q21, TrendForce is bullish on DRAM suppliers’ profitability for the quarter as well and expects market leader Samsung to reach 50% in operating profit margin for the first time in nearly three years.

Taiwanese suppliers delivered similar revenue growths to the three dominant suppliers’ in 2Q21 thanks to persistent market demand for specialty DRAM

Taiwanese DRAM suppliers posted a massive increase in their revenues for 2Q21 owing to persistently high specialty DRAM quotes and high demand from clients. More specifically, Nanya Tech’s revenue grew by about 28% QoQ for 2Q21, and its operating profit margin increased from 17.1% in 1Q21 to 31.2% in 2Q21. These growths can primarily be attributed to a 30% increase in the company’s specialty DRAM quotes, and Nanya Tech has expressed that it expects further earnings growth in 3Q21. Winbond, on the other hand, saw strong demand from its clients and raised its DRAM quotes by a greater magnitude than its NAND Flash quotes. Winbond’s revenue from its DRAM business not only rose by 39% QoQ in 2Q21, but also accounted for an increasing share of its total revenue, at 46%.

It should be pointed out that the two aforementioned Taiwanese suppliers are still currently facing the issue of insufficient production capacities, and their existing fabs do not have the physical space to house additional manufacturing equipment. Hence, before these suppliers finish constructing new fabs, they must rely on raising quotes in order to grow their DRAM businesses in the short run. Nanya Tech’s new fab that is currently under construction will not be able to contribute to the company’s production capacity until construction concludes in 2024. In the short run, Nanya is able to marginally increase its bit output only through migrating to advanced process technologies at the 1A/1Bnm nodes. Similarly, Winbond will not be able to resolve its issue of insufficient production capacity until its fab located in Luzhu, Kaohsiung, kicks off mass production in 2H22. As for PSMC, its revenue from sales of PC DRAM products manufactured in-house increased by about 7% QoQ in 2Q21. However, PSMC’s total revenue from both sales of in-house DRAM and its DRAM foundry business increased by 19% QoQ in 2Q21. Much like its Taiwanese competitors, PSMC must carefully allocate its limited production capacity between logic IC products and memory 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

Suppliers and clients in the server DRAM market are still having difficulty in reaching agreements on prices for 3Q21 contracts even though the quarter is well underway, according to TrendForce’s latest investigations. Hence, server DRAM contract prices are much more varied than before. Regarding the price trend in July, contract quotes for the mainstream 32GB RDIMMs rose by 5-7% MoM.

However, the price hikes have led to a reduction in demand, and there are indications that server DRAM sales bits will register some decline for 3Q21. The release of server CPUs based on the new platforms is driving the procurement of higher-density 64GB RDIMMs, but this has not resulted in a significant corresponding increase in content per unit. The general trend for buyers is to replace two 32GB modules with one 64GB module, rather than a one-to-one replacement as DRAM suppliers previously expected. Contract prices of 64GB RDIMMs rose by 5-7% MoM for July, though prices were below this range for some transactions.

TrendForce’s analysis shows that server DRAM suppliers and buyers are finding it difficult to reach a consensus on prices because DRAM suppliers expect that the demand for server DRAM modules is going to surge in 3Q21 as the third quarter is the traditional peak season for the server market. As well, suppliers also anticipate that the adoption of new server processor platforms will increase the memory content in servers.

With a more optimistic demand outlook, suppliers have adjusted their product mixes to allocate more of their production capacity to server DRAM. Hence, the supply fulfillment rate has risen significantly in the server DRAM market in 3Q21. Server DRAM buyers, on the other hand, already have a high level of inventory. Clients in the data center segment were aggressively stockpiling during the first half of this year due to worries about the impact of the COVID-19 pandemic on the supply chain. They now need some time to consume their inventories and are reluctant to procure more DRAM modules.

Contract prices will be constrained to rise further in 4Q21 as demand side has turned conservative

Currently, enterprise server OEMs in North America have finished arranging their quarterly contracts, whereas numerous cloud service providers and Chinese enterprise server OEMs are still in the midst of negotiations. TrendForce believes that, in order to reach their targets for sales and shipments, server DRAM suppliers may be willing to cut more “special deals” for server DRAM products in August. Specifically, suppliers will push for lock-in contracts that offer adjustable prices for fixed quantities.

On the whole, the general behaviors of DRAM buyers with regards to procurement have changed noticeably form the first half of this year. As the demand related to servers, PCs, and other major applications slows down, the whole DRAM market will gradually shift to the state of oversupply. Since the DRAM market is an oligopoly, the major suppliers will still have significant leverage in price negotiations. Quotes for server DRAM products could therefore rise further by 5-10% QoQ in 3Q21. However, given that prices have yet to be finalized for a substantial portion of 3Q21 contracts, the transaction volume is also very limited. This, in turn, will inevitably create a lot of uncertainties with respect to the price trend in 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

Now that most negotiations over contract prices of PC DRAM for 3Q21 have concluded, DRAM suppliers’ low inventories and the arrival of the peak season for DRAM procurement have resulted in a 3-8% QoQ increase in PC DRAM contract prices for 3Q21, although this is a relatively muted growth compared to the 25% increase experienced in 2Q21, according to TrendForce’s latest investigations.

However, demand for PC DRAM in the spot market began to show signs of bearish movement in early July ahead of time, as DRAM suppliers continued to lower prices in order to adjust their DRAM inventories. Regarding the contract market, PC OEMs currently carry relatively high levels of DRAM inventory because they substantially stocked up on PC DRAM beforehand in anticipation of an upcoming shortage. Not only has PC OEMs’ high DRAM inventory put downward pressure on possible price hikes for PC DRAM, but the gradual lifting of COVID-related restrictions in Europe and the US will also likely lower the overall demand for notebook computers, thereby pulling down the overall demand for PC DRAM. TrendForce therefore forecasts a 0-5% QoQ decline in PC DRAM contract prices for 4Q21.

Regarding spot prices of DRAM modules, most major module suppliers have also started to lower prices in an attempt at inventory reduction, leading to a persistent downward trend for spot prices of PC DRAM modules throughout August. According to TrendForce’s findings, this decline in spot prices of mainstream PC DRAM modules, which began on May 20th, accumulated to 32% as of August 3. Furthermore, spot prices of PC DRAM modules have, for the first time in 2021, now fallen below contract prices for 3Q21 by almost as much as 20% and are unlikely to experience a price hike in the short run.

Since PC OEMs still keep a high inventory of PC DRAM, their upcoming procurement activities for PC DRAM will likely remain sluggish

An overview of the PC DRAM market throughout 2021 shows that, as the COVID-19 pandemic reached its peak in 2Q21, most purchasers aggressively stocked up on various components, including memory solutions, in order to avoid possible shortages, and these stock-up activities were particularly bullish in the PC market. As a result, PC DRAM prices underwent a massive 25% increase in April, and demand bits also saw a surge during the quarter.

Moving into 3Q21, buyers and sellers in the PC DRAM and server DRAM markets found it difficult to reach an agreement while negotiating over contract prices throughout the end of July. As such, the increase in PC DRAM prices for 3Q21, along with the increase in PC DRAM sales bits, is significantly weaker compared to 2Q21. In addition, TrendForce indicated at the end of June that most PC OEMs were carrying about 8 to 10 weeks’ worth of PC DRAM inventory, with some even surpassing 10 weeks. Their inventories have not undergone significant improvements as of early August. As these PC OEMs gradually take delivery of DRAM they procured for 3Q21, some of them now carry inventories exceeding 12 weeks’ supply. TrendForce therefore believes that the persistently growing inventories of PC OEMs will likely result in a further weakening of PC DRAM contract prices in 4Q21.

Looking ahead to 4Q21, TrendForce expects PC shipment, particularly Chromebook shipment, to remain in a downward trajectory following increased vaccinations in Europe and the US. The latest data show that branded Chromebook shipment peaked in 2Q21 and subsequently underwent monthly declines following this peak. Furthermore, the overall demand for notebook computers has started waning as the general public resumes its day to day activities, such as a return to offices and schools, in light of the gradual lifting of COVID-19 restrictions in Europe and the US. Hence, TrendForce believes that, despite the cyclical upturn of the notebook market in 4Q21, as well as the commercial segment’s replacement demand, ODMs will likely continue to cut back on notebook production on a quarterly basis, in turn decreasing the overall demand for PC DRAM.

Prices of both consumer DRAM and graphics DRAM are expected to enter into a downturn in 4Q21 owing to weak supply and demand

In sum, the sufficiency ratio of PC DRAM increased from -1.13% in 3Q21 to 0.28% in 4Q21. Hence, TrendForce expects contract prices of PC DRAM to take a downward turn in 4Q21, while prices of DDR4 consumer DRAM, which are highly correlated with PC DRAM prices, will likely undergo a similar decline. Likewise, contract prices of graphics DRAM are expected experience a looming decline as well, since the sudden cryptocurrency downturn resulted in a corresponding plummet in cryptocurrency mining demand and, by extension, spot prices of graphics DRAM, which is used in cryptocurrency mining equipment.

Regarding server DRAM, contract prices are expected to mostly hold flat, without noticeable hints of price hikes, in 4Q21. This trend can be attributed to the server industry’s migration to Intel’s new Ice Lake platform, which has been steadily rising in terms of penetration rate, as well as the fact that demand for servers has yet to weaken. However, MoM declines in server DRAM contract prices may potentially take place in November and December. Likewise, mobile DRAM prices are expected to remain relatively unchanged in 4Q21 compared to the previous quarter. The profitability and ASP/Gb of this product category are relatively lower compared to other DRAM products, such as PC DRAM and server DRAM, and it did not experience as much of an uptrend during the prior quarters. Hence, while PC DRAM prices are expected to decline in 4Q21, mobile DRAM prices will remain sustainable, without undergoing a similar decline.

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

After Malaysia extended its MCO (movement control order) 3.0, the Filipino government also announced the implementation of ECQ (enhanced community quarantine) measures in Metro Manila until August 20 in response to the Delta variant’s rapid spread in Southeast Asia that began in July. According to the August edition of TrendForce’s MLCC Market Bulletin, Japanese MLCC supplier Murata operates a manufacturing facility in Tanauan City, primarily for large-sized automotive MLCC (0.06 x 0.03 inches to 0.12 x 0.06 inches) production.

This facility manufactures capacitors that meet the auto industry’s requirements of high capacitance, high voltage, and high temperature tolerance, and its monthly automotive MLCC production capacity accounts for about 18% of the industry total. As demand from the automotive market increases, Murata’s Tanauan-based facility is expected to maintain a high capacity utilization rate going forward.

Samsung likewise operates an MLCC manufacturing facility in the Philippines, albeit in Calamba City. While the Calamba facility is primarily responsible for manufacturing normal MLCC (which are low-end and mid-range MLCC with standardized size/specs), its monthly normal MLCC production capacity accounts for 15% of the industry total and is second only to Samsung’s Tianjin-based facility. As well, the Calamba facility operates at a capacity utilization rate of more than 90%.

TrendForce’s findings indicate that the aforementioned facilities are located approximately 67 km south of Manila and therefore do not fall under the ECQ order as yet. The two facilities are operating and shipping as normal. However, should the emergency implementation of ECQ in Metro Manila fail to contain the Delta variant, the pandemic would likely to make its way south, in turn affecting the two facilities. Both Murata and Samsung are on high alert against such an eventuality. On the other hand, given that Malaysia has yet to recover from the ongoing pandemic and lift its MCO 3.0 restrictions, Taiyo Yuden’s Malaysia-based MLCC manufacturing facility is operating at 80-85% capacity. The resultant shortfall of high-end MLCC supply will likely make it difficult for ODMs to procure sufficient high-end MLCC in 3Q21.

Various governments in Southeast Asia have implemented nationwide or regional lockdowns as well as movement control orders in order to curb the spread of the pandemic. As such, MLCC suppliers including Taiyo Yuden, Murata, and Samsung, all of which have facilities located in Malaysia and the Philippines, are now confronted with an increasing risk of uncertainties regarding their production capacities and shipment schedules. Looking ahead into the peak procurement period of 3Q21, TrendForce expects some ODMs to redirect their low-end and mid-range MLCC orders to Taiwanese suppliers such as Yageo and Walsin in the short run.

Recent reemergence of COVID-19 in China threatens the lifeblood of MLCC production

Home to 55% of the world’s MLCC production bases, China has seen a reemergence of the pandemic in August in Nanjing and Zhangjiajie. It should be pointed out that Murata and Yageo operate major MLCC manufacturing facilities in Wuxi and Suzhou, which, much like Nanjing, are also located in the province of Jiangsu. Should the pandemic continue to worsen in China, the global supply of MLCC would undoubtedly sustain significant damage as a result. Despite China’s aggressive efforts to contain the pandemic through comprehensive population testing and movement controls, the spread of the Delta variant still poses a global threat. Therefore, aside from the current state of disease containment in Southeast Asia, how China manages its pandemic situation will become another vital point of observation for the MLCC market.

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