Varied Performance Results for NAND Flash Suppliers in Q2 as They Pursue Different Business Strategies, Says TrendForce

NAND flash suppliers’ revenue results, profit margins and other performance indicators varied because of differences in their eMMC, eMCP and SSD product strategies. Suppliers are working hard to accelerate the development of 15nm and 16nm TLC-based products such as eMMC, eMCP, SSD and other embedded products. Furthermore, NAND flash makers with the exception of Samsung are expected to begin small-batch runs of 3D-NAND flash in the fourth quarter of this year, according to DRAMeXchange, a division of TrendForce.

“Smartphone, tablet and notebook vendors are lowering their sales forecasts for the second half of this year due to macroeconomic conditions that have weakened the demand growth for flash-based end products,” said DRAMeXchange Assistant Vice President Sean Yang. “The NAND flash market is expected to see oversupply, which will affect memory suppliers’ performances to end of the year by pressuring them to cut prices.”

Samsung

Set against the first quarter, Samsung had a 13% jump in both bit shipment volume as well as NAND flash revenue, which reached US$2.7 billion. This gain was attributed to the stock up demand for high-end mobile NAND flash products from strategic smartphone clients and the rapid growth in Samsung’s market share for SSD products used by PC OEMs. Samsung’s bit shipment growth was also the result of capacity expansion in the supplier’s fab in Xian, China. Looking ahead to third quarter, Samsung’s bit shipment volume are expected to increase further by 10~15% if the supplier manages to maintain its growth in the SSD market.

As for product planning, Samsung will start delivering samples of its third-generation 3D-NAND flash to clients for verification at the end of the third quarter, and mass production and shipments are set at the fourth. Samsung will maintain the pace of its planar NAND process development in order to improve its cost advantage. Yang added that the diversification of the SSD product lines is the main focus of Samsung’s NAND flash strategy for this year.

Toshiba

Toshiba’s focus for 2015 is to speed up the development of 15nm products. In the second quarter, Toshiba finished the client verification process for its 15nm MLC-based eMMC and eMCP products, which are set for mass production and deliveries in the third quarter. Toshiba’s leading products in the retail market are currently the 15nm TLC-based flash memory; and mass production and deliveries of TLC-based eMMC and SSD products will occur sometime from this year’s second half to next year’s first quarter. Yang stated that Toshiba’s 15nm output is expected to account for over 60% of its production by the end of 2015. Furthermore, small-batch runs of the 48-layer (256Gb) 3D-NAND flash, which Toshiba is developing in collaboration with SanDisk, is set to begin in this fourth quarter. The new product will initially be adopted in SSDs.

SanDisk

SanDisk’s revenue reached US$1.1 billion in the second quarter, down by 8% compared with the prior period. The revenue decline was caused by delays in the verification processes for enterprise-SSDs and embedded NAND flash for the mobile application. Another factor was the loss of a major client-SSD customer. SanDisk’s bit shipment growth also dropped 1% versus the first quarter, while its average selling price and average bit cost fell by 6% and 4% respectively. These decreases affected the supplier’s overall gross margin.

In terms of product planning, SanDisk is accelerating the adoption of its own NAND flash in its enterprise SSD products. The supplier’s 15nm TLC-based eMMC and eMCP products are expected to complete client verification in the third quarter, and mass production and deliveries are scheduled in the fourth. SanDisk has also launched 15nm MLC-based products to meet the challenges in the highly competitive enterprise SSD market. According to Yang, SanDisk will start to turn around in the second half of this year if it manages to effectively execute its product strategy.

SK Hynix

SK Hynix’s NAND flash revenue reached US$973 million in the second quarter, up slightly by 1% over the previous quarter. The supplier also saw a quarterly bit shipment growth of 8% and a quarterly drop of 6% in the average selling price. During the second quarter, SK Hynix benefitted from stable NAND flash prices in the OEM market as well as new smartphone and SSD sales.

SK Hynix has started to ship its 16nm TLC-based chips to strategic smartphone clients. Therefore, its TLC-based output ratio is likely to rise rapidly in the second half of this year and may reach 40% by the year’s end. SK Hynix is also set to begin mass production of 3D-NAND flash in this fourth quarter, with the initial production used in the supplier’s enterprise SSD product lines. Shipments of 3D-NAND flash to PC OEMs will begin in the second half of 2016. SK Hynix’s bit shipment growth for the third quarter of 2015 is estimated at upwards of 10%.

Micron

Micron’s revenue, which was based on its fiscal third-quarter results (from March to May), amounted to US$1.26 billion, a 2.7% increase compared with the previous fiscal period. During its fiscal third quarter, Micron continued making product mix adjustments and raised the sales ratios of eMMC and SSD products. Consequently, Micron’s bit shipment volume also dropped slightly by 2% versus the second fiscal quarter. Costs and prices for Micron’s SSDs were also higher than corresponding products sold in the retail channels, and its average selling price and average bit average cost respectively rose 6% and 3% in the fiscal third quarter.

Micron’s TLC-based consumer products are replacing the MLC-based counterparts at an increasing speed. Moreover, Micron will be rolling out branded SSD products with the supplier’s own TLC chips in late September, and by 2016 more than half of Micron’s SSDs will be TLC-based. The supplier will also start mass production and deliveries of its 3D-NAND flash products in early October. Among Micron’s SSD products, the shipments of enterprise-SSDs started to pick up in its third fiscal quarter. Compared with the previous fiscal period, Micron saw a big 45% jump in revenue related to enterprise-SSD sales. Additionally, Micron’s collaboration with Seagate has enabled SAS SSD shipments. DRAMeXchange anticipates rising NAND flash profit for Micron as long as the supplier progresses steadily with its product mix adjustments.

Intel

Set against the previous period, Intel’s bit shipment volume rose considerably by 10% this second quarter. This growth was owed to pull-in orders from strategic clients and market share gains related to other clients. Moreover, Intel’s average selling price only saw a limited drop. Consequently, the supplier’s second-quarter NAND flash revenue saw a 10% increase over the prior period, totaling US$665 million.

As for product planning, Intel’s enterprise SSD products based on 3D-NAND flash technology will start shipping this fourth quarter. A next-generation memory jointly developed with Micron, known as 3D X Point, is currently under test production. With mass production scheduled to begin next year, 3D X Point will be mainly used in enterprise and high-end data center products. The new memory technology is likely to help maintain Intel’s lead in the enterprise SSD market.