In response to persistent softening in demand, Samsung has taken a decisive step: a sweeping 50% production cut from September, with the focus mainly on processes under 128 layers. According to TrendForce‘s research, other suppliers are also expected to follow suit and increase their production cutbacks in the fourth quarter to accelerate inventory reduction. With this maneuver in play, Q4 NAND Flash average prices are projected to either hold firm or witness a mild surge, possibly in the ballpark of 0~5%.

Aligning with TrendForce’s early-year forecasts, NAND Flash prices are poised to rally ahead of DRAM. With mounting losses for NAND Flash vendors and sales prices nearing production costs, suppliers are opting to amplify production cuts to help stabilize and potentially increase prices. Notably, NAND Flash Wafer contract prices kickstarted their revival in August. Given expanding production curtailments, there’s optimism around the resurgence of customer stockpiling, further amplifying price dynamics in September. Yet, for this positive price trajectory to sail smoothly into 2024, a sustained curtailing in production and a robust rebound in enterprise SSD purchase orders are pivotal.

A silver lining for suppliers: Deficit anticipated to shrink, with module makers reaping benefits

While NAND Flash enjoys a nimbleness in pricing over its counterpart, DRAM, 2023 has yet to witness any notable demand upticks. The overshadowing influence of AI servers, especially edging out general-purpose servers, has made the NAND Flash market forecast underwhelming this year. This narrative unfolds with a continuing dip in Q3 average prices and suppliers grappling with widening deficits.

Diving into supplier inventory levels, TrendForce casts its gaze on Samsung. If the hope is for end-users to ramp up stockpiling to slash inventory by year-end, it might be wishful thinking. Instead, the real game-changer is stringent production control. Samsung’s aggressive production cuts are likely to set off a ripple effect: a potential price uplift for their primary products. This ripple is anticipated to propel the overall bit shipment volume of NAND Flash in Q4, gradually narrowing the deficit gap for suppliers. Simultaneously, this shift will likely improve the profit outlook for module makers.

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

In compliance with the local policy, Samsung’s Austin-based foundry Line S2 partially suspended operation on Tuesday, Feb 16 due to the winter storm affecting Texas. According to TrendForce’s investigation of the event, as the city’s public utility Austin Energy was able to warn of an impending power blackout ahead of time, the partial shutdown of the plant was not accidental but planned in advance. TrendForce’s data show that the monthly 12-inch capacity of Line S2 accounts for nearly 5% of the global total. While the winter storm is estimated to impair about 1-2% of the global 12-inch wafer foundry capacity, the actual duration of the impact will still depend on the region’s temperature. Assuming that Austin will gradually warm up on Friday, Feb 19, and a phased restoration of power will take place at the fab, TrendForce now expects Line S2 to return to full operation after at least one week.

TrendForce indicates that the main process technologies of the fab are the 14nm and 11nm nodes. These technologies are mainly used to manufacture Qualcomm’s 5G RFICs. The fab’s other production capacity is distributed among production lines that feature nodes ranging from 65nm to 28nm and mainly manufacture products under Samsung System LSI. Additionally, the fab manufactures automotive chips for Tesla and Renesas. Although Samsung had implemented corresponding measures in advance of the blackout, with no silicon wafers reported to be damaged and a mere slight extension in lead times for certain products, Line S2’s increased lead times are still expected to exacerbate the strained semiconductor market in light of the industry’s shortage of production capacities for various semiconductor applications, including automotive products, which remain in extremely high demand.

Despite the blackout’s limited impact on NAND Flash controller manufacturing, urgent orders from SSD purchasers may result in a potential price hike

It should be pointed out that, although Line S2 has stopped manufacturing NAND Flash, Samsung LSI still manufactures 14-40nm NAND Flash/SSD controllers at the fab. Given that the volume of wafer starts for controllers at Line S2 is relatively low, and Samsung had already made emergency response preparations ahead of time, the blackout is expected to result in only a slight extension of lead times, without significant impact on the overall controller output. However, as PC OEMs and CSPs are now starting to negotiate for the procurement of SSDs, major SSD suppliers have taken the strained supply of controller ICs into account when quoting SSD prices. As such, despite the blackout’s relatively low impact on NAND Flash/SSD controller manufacturing, SSD purchasers, including the aforementioned PC OEMs and CSPs, may potentially accept a price hike during the negotiation process due to their urgency in procuring additional SSDs. With regards to 2Q21 prices, TrendForce is currently adhering to the previous forecast of “mostly flat” for client SSDs and “slight decline” for enterprise SSDs, but TrendForce does not rule out the possibility that overall SSD prices may move in a positive trajectory once some purchasers accept a price hike.

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 demand continues to rise as strong sales of notebook (laptop) computers spur PC OEMs to place additional orders for client SSDs, according to TrendForce’s latest investigations. Also, the supply-side inventory for NAND Flash memory has already fallen considerably due to the aggressive stock-up activities of some smartphone brands. With customers in the data center segment expected to ramp up procurement in 2Q21, NAND Flash suppliers have decided to scale back the supply of NAND Flash wafers. Compared with other product categories, wafers have a lower gross margin. As a result of these factors, the decline in contract prices of wafers has been easing over the past two months (i.e., from December of last year to January of this year).

TrendForce indicates that the migration to the 1XX-L processes has not been proceeding as smoothly and rapidly as expected for notebook SSDs during 1Q21. The testing and approval of 1XX-L products by PC OEMs has actually fallen behind schedule, so the bulk of demand is staying with the 92/96L processes rather than shifting toward the more advanced stacking processes. At the same time, customers in other application segments are still focusing their demand on the 92/96L processes as well as the 64L processes. Consequently, the NAND Flash market is now seeing a general tightening of supply. Wafers are the first to be affected by this turn of events since this product category is low on priority for suppliers. As suppliers curb the quantity of wafers in order to meet the growing demand from other applications, contract prices of wafers are starting to display a more stable trend. In fact, some suppliers are raising quotes for wafers this February. Based on this latest development, TrendForce has revised its projection of wafer prices for 1Q21. The previous projection predicted a QoQ decline of 10-15%, whereas the latest projection indicates that prices will hold relatively steady from 4Q20.

Looking ahead to 2Q21, customers in the data center and server segments are expected to generate a stronger procurement momentum. NAND Flash suppliers will therefore concentrate on meeting the demand for enterprise SSDs and pay less attention to the wafer segment. However, the volume of orders from module houses will be somewhat muted due to the influence of the ongoing shortage and price hike for NAND Flash controller ICs. As both supply and demand become weakened, NAND Flash wafer prices are thereby expected to remain mostly flat for 2Q21.

ICs in the upstream supply chain, however, remain in severe shortage. As such, even though NAND Flash suppliers have been putting forth a full effort to fulfill the demand for client SSDs, they will still have to beware of the possibility that actual notebook shipment may fall short of expectations due to an uneven distribution in the supply of raw materials. Furthermore, should the pandemic become gradually alleviated in 2H21, the global notebook demand may begin approaching pre-pandemic levels, in turn leading PC OEMs to revise their business plans accordingly. TrendForce therefore believes that uncertainties will still exist in the NAND Flash market in 2H21.

With regards to the NAND Flash wafer market, the current short supply can be attributed to the fact that demand is mainly focused on certain specific product generations. The decline in NAND Flash wafer prices in 1H21 is thus drastically narrowed, while demand from mostly the server side will also provide some upward momentum for NAND Flash wafer prices afterwards. However, Micron will ramp up its 176L products starting from 3Q21. As these products have been significantly improved in terms of cost, and the main NAND Flash applications will have transitioned to products with higher layer counts by then, the impact on NAND Flash wafer prices in 2H21 remains to be seen.

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