Driven by Strong Demand from Data Center Clients, 4Q19 NAND Flash Revenue Grows 8.5%, Says TrendForce

• Surging demand from data center clients in 4Q19 helped reduce suppliers’ stock levels.
• 1Q20 revenue trended flat QoQ due to decreased bit shipment and increased prices.

According to the DRAMeXchange research division of TrendForce, 4Q19 NAND flash bit shipment increased by nearly 10% QoQ thanks to demand growth from data center clients. On the supply side, contract prices made a successful rebound due to shortages caused by the power outage at Kioxia’s Yokkaichi production base in June. In sum, 4Q19 NAND flash revenue reached $12.5 billion, an 8.5% increase QoQ.

The stronger-than-expected 4Q19 performance from the demand side helped improve supplier inventory back to normal levels. In response, NAND suppliers were able to reduce their allocations to the wafer market and instead focus on shipping products with comparatively higher margins.

In 1Q20, the COVID-19 outbreak may have an impact on the consumer electronics supply chain, including smartphones and NBs; therefore, total quarterly bit shipment is projected to possibly post a minor decline or flat trend. Even so, this may be offset by the large increase in contract prices, so NAND flash revenue is expected to at least maintain the same level as 4Q19.

Samsung

Owing to the growing demand from data center companies in 4Q19, the demand for Samsung’s SSDs far exceeded its supply; as such, Samsung’s bit shipment increased by almost 10% QoQ. On the other hand, the company also posted an increase in ASP because of the increase in contract prices and the reduction of NAND flash supply in the channel markets. With the simultaneous increase of ASP and shipment, Samsung’s 4Q19 NAND flash revenue reached $4.451 billion, an 11.6% increase QoQ.

In terms of capacity planning, Samsung is continuing to decrease the planar NAND production capacity at Line 12. Its newly expanded second semiconductor plant in Xi’an is operating on schedule and without production delays for now despite potential issues in expansion schedule due to the COVID-19 outbreak.

SK Hynix

Owing to growing demands in the mobile storage and data center markets, SK Hynix’s bit shipment grew by 10% QoQ in 4Q19. However, the increase in SK Hynix’s product storage density offset the increase in contract prices and resulted in a flat ASP. SK Hynix’s NAND flash revenue reached $1.207 billion, a 5.4% increase QoQ.

In terms of capacity planning, SK Hynix’s cutbacks in planar NAND capacity and the corresponding addition in 3D NAND capacity are expected to result in a lower year-end production capacity compared to the start of 2020. In terms of architecture, 128L products are expected to enter mass production in 1Q20. SK Hynix is also planning to release QLC products this year, but it will take longer to see client adoption of QLC SSDs, since SK Hynix’s product mix is still primarily targeted at the mobile market.

Kioxia

Kioxia’s bit shipment increased by almost 10% QoQ thanks to its capacity recovery after the Yokkaichi power outage and to growing demands for data center and PC SSDs. Its ASP also saw a near-5% increase, due to increases in contract prices caused by product shortages. In terms of financials, the power outage affected only 3Q19 operations, without any adjustments to 4Q19 performance; Kioxia’s revenue reached $2.341 billion, a 5.1% increase QoQ.

In terms of capacity expansion, the company’s Iwate-based K1 fab will begin operations in 1H20 and produce 96L/112L products. The added production capacity will be used to compensate for capacity losses from raising the number of cell layers in Kioxia’s Yokkaichi site. Therefore, total wafer starts will remain unchanged.

Western Digital

Owing to the demand placed by Apple’s new iPhones and the surge in data center SSD demand, WD’s 4Q19 bit shipment increased by 24% QoQ. However, the company’s ASP dropped by about 8% QoQ because of its higher-density product mix. WD’s 4Q19 NAND flash revenue reached $1.838 billion, a 12.6% increase QoQ.

In terms of production capacity, WD is continuing to invest in its Iwate-based K1 fab. But the primary function of the added capacity from K1 is meant to offset capacity loss from the Yokkaichi fab’s process nodes and layer improvements, so total output will remain unchanged.

Micron

Maintaining its 3Q19 growth momentum in the mobile storage market, Micron’s shipment of MCP products continued to grow. At the same time, the strong demand for SSDs helped increase Micron’s 4Q19 bit shipment by almost 15%. Also, Micron saw a minor growth in ASP due to the increase in market prices and the adoption of a more profitable product mix. Micron’s revenue grew by 18.1% QoQ and reached $1.422 billion.

In terms of production capacity, Micron’s capacity planning in 2020 is relatively conservative. The clean rooms in its new Singapore-based fab are primarily intended to maintain Micron’s current production capacity. Micron is focused on improving its process nodes and microarchitectures this year; its 128L products are expected to enter mass production in 2H20.

Intel

Like its competitors, Intel benefitted from the strong SSD demand from data centers. Intel responded to its clients’ preemptive pull-in demand with existing stock in 3Q19, in turn raising its 3Q19 bit shipment considerably, by over 50% QoQ. This destocking effort means Intel needed to rely on fab production capacity for its product shipments in 4Q19, during which its bit shipment fell by over 10%. On the other hand, as Intel faced a severe supply shortage, its ASP saw a corresponding increase of over 10% QoQ. Intel’s 4Q19 NAND flash revenue reached $1.217 billion, a 5.7% decrease QoQ.

Intel’s Dalian fab is currently maintaining normal capacity, as the outbreak did not significantly impact fab production. In terms of process nodes, Intel is continuing to develop 144L products, expected to enter mass production in 2H20.