TrendForce Reports NAND Flash Revenue Fell 2.3% in 4Q15 as Oversupply Led to Falling Prices

Set against the prior quarter, the contract prices of NAND Flash memory chips fell by 9~10% in the fourth quarter of 2015 as the market experienced oversupply. Prices of eMMC and SSD products also fell by 10~11% quarterly due to shipments of OEM devices - such as smartphones, tablets and notebooks - being weaker than expected in the same period. With the price decline being greater than bit sales, the fourth-quarter revenue of the global NAND Flash industry suffered a 2.3% quarterly decrease.

“Besides facing rapidly falling prices, the manufacturers have also reached a bottleneck in their process technology migration,” said Sean Yang, research director at DRAMeXchange, a division of TrendForce. Memory makers that are developing or producing 3D-NAND Flash are encountering yield rate issues, with Samsung being the sole exception. As the cost reduction advantage associated with technology migration diminishes, branded NAND Flash suppliers posted significant quarterly declines in both their revenues and operating margins for the fourth quarter of last year.

Samsung

Samsung was one of the few manufacturers that experienced revenue growth in the fourth quarter of 2015 on account of its lead in 3D-NAND Flash development and the rising sales of its high-density eMMC, eMCP and SSD products. In the fourth quarter, Samsung’s NAND Flash business registered a quarterly bit shipment growth of 15% and a 10~15% quarterly slide in the average selling price. The memory maker thus saw a quarterly revenue growth of 4.2% as well as a slight decrease in its operating margin.

Samsung have already shipped samples of its third-generation 3D-NAND Flash to clients and will continue to focus on developing high-density eMCP. The memory maker also plans to rely on 3D-NAND Flash to help consume more its overall capacity and will be applying this technology to enterprise and client grade SSDs of higher densities. New smartphones and tablets that will be released in the first quarter of 2016 will also carry Samsung’s 14nm eMMC and eMCP products. At the same time, Samsung will ship samples of its 14nm, TLC-based products to module makers to further improve its competitive advantage in the channel market.

Toshiba

Toshiba’s NAND Flash business was affected by market oversupply as well. Compared with the prior quarter, the memory maker’s average selling price was 13~14% lower in the fourth quarter of last year. Toshiba only recently began the trial production of 3D-NAND Flash. Moreover, the Japanese memory maker has found that its 15nm process offers limited cost reduction advantage. Thus, the company’s NAND Flash business registered a decline in its operating margin for the fourth quarter.

Toshiba’s Fab 5 continues to be the center of the manufacturer’s 15nm production, which accounted for more than 60% of the manufacturer’s total NAND Flash output by the fourth quarter of 2015. The share of TLC-based memory products in Toshiba’s total output also exceeded 40% during the same quarter due to strong demand from smartphone clients. In Toshiba’s Fab 2, equipment installation is completed and the trial production of 3D-NAND Flash has begun in the first quarter of 2016. In anticipation of future 3D-NAND Flash demand, Toshiba further plans to build a new plant next to Fab 2. Construction is expected to begin in the final quarter of 2016, and the expanded facility is scheduled to begin 3D-NAND Flash production in the first half of 2018.

SanDisk

SanDisk’s product mix adjustments have paid off as client and enterprise grade SSD sales make up an increasing share of the company’s total revenue. SanDisk also saw a 10% quarterly drop in both the average selling price and the average unit cost of its NAND Flash chips in the fourth quarter of 2015. As a result, SanDisk’s gross margin reached 43% in the fourth quarter – on par with the previous quarter.

SanDisk’s extensive Enterprise-SSD product lines (including SAS, SATA, and PCIe) continue to receive favorable reviews. SanDisk is now focusing on 15nm TLC-based products for the Client-SSD market and will be developing TLC-based eMMC and eMCP. The memory maker in particular will target the eMMC market. Since eMMC products are of high density and offer higher margins, SanDisk will be able to reduce the risk of getting into price wars.

In the fourth quarter of 2015, 75% of SanDisk’s NAND Flash output came from its 15nm process. The memory maker is also expanding its range of TLC-based products, so the TLC representation in the total output also reached 70% in the same period. Currently, SanDisk’s 3D-NAND development is in the trial production phase.

SK Hynix

Compared with the third quarter of 2015, SK Hynix’s fourth-quarter NAND Flash revenue fell by 9.3% to US$841 million. The South Korean memory supplier also saw a 4% bit shipment growth and a 15% slide in the average selling price. As tablet and smartphone shipments from strategic clients are expected to suffer a huge drop in the first quarter of 2016, DRAMeXchange projects SK Hynix to post a 10% quarterly decline in bit shipments as well.

With clients switching to TLC-based mobile NAND products, SK Hynix has raised the TLC ratio in its total NAND Flash output to 40%. The memory maker’s M14 fab, which is undergoing the second phase of its expansion, will be in operation in the second half of 2016 in order to meet this year’s 3D-NAND Flash demand. The mass production of 14nm TLC-based products will also begin in the same period.

Micron

Set against the previous fiscal period, Micron’s bit shipments for the first fiscal quarter of 2016 (from September to November last year) registered a 6% quarterly increase, while its average selling price dropped by 7% and unit cost fell by 6%. Micron’s revenue for the first fiscal quarter of 2016 therefore arrived at US$1.15 billion, up 1.9% from the prior fiscal quarter.

Micron currently is accelerating its efforts to make the transition to 3D-NAND Flash and have sent samples to module makers. Its newest fab in Singapore, 10X, is on schedule to begin mass producing 3D-NAND Flash in the second half of 2016. Micron’s product strategy for 3D-NAND Flash is focused on USBs and Client-SSDs. The memory maker has also developed its own brand of 3D-NAND Flash SSD products, which will be delivered to PC-OEMs for sampling this third quarter.

As for product mix, wafer and chip sales accounted for nearly 50% of Micron’s total revenue in the fourth quarter of 2015, while mobile NAND represented 15~20% and SSD brought in around 15%. The remainder came from automotive, telecommunications, and industrial memory products. However, the ratio of TLC-based products was around 10%, lower than previously expected. This was attributed to target customers showing stronger demand for MLC-based products used in Enterprise-SSDs.

Intel

Intel’s major Enterprise-SSD customers pulled inventory in advance during the third quarter. Consequently, Intel’s bit sales grew 10% quarterly in the fourth quarter of 2015. However, the oversupply in the fourth quarter resulted in a steeper decrease in the average selling price, causing Intel’s revenue fall slightly by 0.2% quarterly to US$662 million. 

The memory maker is currently carrying out the conversion of its Dalian fab in China from producing logic ICs to 3D-NAND Flash. The Dalian fab will begin doing small-batch runs of 3D-NAND Flash in the final quarter of 2016. Intel is also continuing its work on 3D XPoint. The testing of this next-generation memory technology will also begin in the fourth quarter of this year.