TrendForce: Market Transactions Sluggish due to Weak Chinese Holiday Sales, 1H'October NAND Flash Contract Prices Remain Flat

According to DRAMeXchange, a research division of TrendForce, the market transactions were sluggish in 1H'October due to the underwhelming Chinese holiday sales and the conservative attitude displayed towards the market situation for Thanksgiving and Christmas. While SK Hynix's Wuxi plant fire accident prompted some manufacturers to allocate portions of their NAND Flash capacity to DRAM, the mainstream NAND Flash contract prices have stayed mostly flat throughout1H'October.

Looking at the supply side, in the periods following the fire accident at the Wuxi plant, SK Hynix will take steps to make up for its lost production by shifting parts of the M12 plant's NAND Flash capacity to DRAM. Approximately 40K/m wafers are expected to be allocated on a monthly basis. Samsung, meanwhile, is planning to use up to 5% of its NAND Flash capacity for DRAM production. Because of the short term decreases in wafer volumes resulting from the aforementioned developments, the Q4 NAND Flash industry bit growth is projected to slide down to approximately 7.8% QoQ. With the NAND Flash-to-DRAM allocation processes expected to last until 1H14, the 1Q14 bit growth will likely only be 5.9% QoQ.

Looking at the demand side, due to the sluggish sales in the memory card and UFD markets, the not-as-expected results of the major vendors' aggressive pricing strategies in Asia and other special regions, and the growing saturation in the high-end smartphone and tablet markets, various vendors are beginning to display an increasingly more cautious attitude towards the Q4 sales performances.

While the supply of NAND Flash is expected to decrease in the short term following SK Hynix's and Samsung's capacity adjustments, TrendForce believes the NAND Flash contract prices could still drop due to the yet-to-improve end demand situation, the tendency for inventories to remain high, and the lack of willingness on the suppliers’ part to replenish or purchase inventory as the traditional off-peak quarter arrives in 2014.