TrendForce Forecasts Limited Growth in Global NAND Flash Revenue Next Year Due to Economic Uncertainties

The latest survey from DRAMeXchange a division of TrendForce, finds that increase in both SSD demand and average memory density of end devices will contribute to a 44% year-on-year growth of bit demand in global NAND Flash market in 2016. On the supply side, NAND Flash suppliers will step up their efforts in cost reduction and in development of 3D-NAND Flash to stimulate demand. Therefore, the global NAND Flash bit output for 2016 will also surge 50% year on year, based on DRAMeXchange’s estimation.

“Market supply will greatly exceed demand next year, causing sharper price decline,” said Sean Yang, DRAMeXchange research director. “Our forecast for 2016 indicates that worldwide revenue of NAND Flash industry will grow by just 0.2% year on year to US$26.6 billion. Suppliers are expected to face increasing pressure on their operating margins.”

DRAMeXchange foresees the following trends to influence the NAND Flash industry in 2016:

Industry’s attention will be focused on the progression of 3D-NAND Flash development

Next year will be a critical period for suppliers in terms of technology migration and product mix adjustment. The backend testing and assembly, in particular, will encounter a bottleneck as it tries to catch with the frontend wafer manufacturing, which adopted 15nm/16nm processes as the mainstream technology in the third quarter of 2015. Moreover, Samsung is already mass producing 3D-NAND Flash memory and has successfully used this technology to capture a share of the SSD market. Rival suppliers therefore are under pressure to speed up their 3D-NAND Flash development efforts. For next year, DRAMeXchange estimates that the NAND Flash industry will achieve around 16.7 million wafer starts (sized around 12-inch) in total, up 12% year on year. The acceleration in the development of 3D-NAND Flash will propel bit supply growth by a whopping 50% year on year, its highest in four years.

Yang also noted: “Though 3D-NAND Flash is expected to account for just 11% of the total NAND Flash output in the fourth quarter of 2015, the share will rise rapidly to 30% by the end of 2016. This in turn will lower the costs of SSDs, leading to an increase in the SSD adoption among OEM system vendors.”

Chinese semiconductor companies will be pivotal to the development of NAND Flash industry as they gradually implement their roadmaps

Chinese semiconductor companies are becoming vertically integrated, extending their presence across the NAND Flash supply chain, from up- to downstream. Hence, they are expected to have a crucial role in the transformation of the industry in the next three to five years. China’s huge semiconductor market has also enticed NAND Flash suppliers from abroad to make increasingly large investments in building and upgrading fabs in the country. Samsung, for instance, is expanding its fab in Xian, while Intel will be converting its fab in Dalian from making logic ICs to making NAND Flash memory. Based on DRAMeXchange’s projection, approximately 8% of the total NAND Flash wafers from major international suppliers will be manufactured in China by the end of 2016, and the country’s share in global production will increase further at a rapid pace. 

Average memory density of NAND Flash products in end devices will continue to rise; SSDs will lead the demand

Yang added that with various consumer electronics products seeing limited shipment growth, NAND Flash demand next year will be based on increasing the content per box. Moreover, decline NAND Flash prices will accelerate. In sum, DRAMeXchange estimates that the average density of both Client-SSD and smartphone eMMC products will increase at least 30% year on year in 2016.

SSD prices in general have fallen rapidly on account of the momentum in 3D-NAND Flash development and rising penetration of TLC technology. This downtrend benefits the Client-SSD market as PC-OEMs are now more willing to buy SSDs and design PC products that carry SSDs. DRAMeXchange projects that the penetration of SSD-equipped products in the notebook market for 2015 will reach about 27%. By the end of 2016, 128GB SSDs are forecast to cost less than 500GB HDDs and prices of 256GB will almost match those of 1TB HDDs. At that time, the SSD penetration in the notebook market is also expected to exceed 30%.

Also, the surging demand for data center services will also maintain strong growth in the Enterprise-SSD market. Total bit consumption of NAND Flash from all SSD products will jump by 35% year on year in 2016, based on DRAMeXchange’s estimation. Thus, SSDs will contribute the most to overall NAND Flash demand next year compared with other categories of end device products.