[News] SSD Prices Keep Rising

2024-04-09 Semiconductors editor

Following the shortage of HBM memory production capacity, the memory market is experiencing another shortage. As the memory market plunged into a downturn in 2021, SSD prices continued to slide for about two years. In response to market changes, memory manufacturers reduced production of NAND Flash. With the effective implementation of production reduction strategies, demand partly increased, leading to a tightening supply of SSD.

Recently, it’s reported that NAND Flash product market has experienced a shortage in enterprise SSD.It’s believed that this is mainly due to the AI boom, coupled with the large-scale construction of data centers by global technology giants, which has significantly increased the demand for memory devices, resulting in a tight supply of SSDs. In this context, major memory manufacturers began to take action.

Amid the SSD Supply Shortage, Suppliers Raise Prices Drastically

  1. Samsung Hikes Prices of Enterprise SSD

Over the past two weeks, it’s frequently reported that enterprise SSD faced a shortage, prompting the major memory manufacturer Samsung to consider a price increase of 25% on enterprise SSD.

According to a report from BusinessKorea on April 2nd, Samsung is rumored to implement a price increase of 20-25% on enterprise SSD in 2Q24, aiming to reverse the downward trend experienced since 2023. Initially, Samsung planned to raise prices by around 15% from the previous quarter. However, due to higher-than-expected demand, Samsung has decided to expand the price increase. As Samsung holds approximately half of the market share in enterprise SSD, it will exert a significant influence over pricing decisions.

As per a research by TrendForce on March 7th, Samsung dominated the global enterprise SSD market with a market share of 41.7%, followed by SK Hynix (33.2%), Micron (10.8%), Kioxia (9.4%), and Western Digital (4.9%) in 4Q23.

It is worth mentioning that these five companies are also among the top five NAND Flash memory giants globally. These original manufacturers not only produce NAND Flash memory but also develop controller ICs and manufacture enterprise SSD products.

According to previous study by TrendForce, the controller IC field is mainly divided into two major camps: One contains the aforementioned memory manufacturers, who generally do not sell controller ICs externally, although Micron’s controller ICs are used both in their own products and sold to other manufacturers; the other refers to IC design companies, represented by companies such as Marvell, SIMO, and Phison.

As a pioneer in controller ICs field, Marvell occupies the high-end market for a long time, supporting the use of high-performance and large-capacity SSD in enterprise and large-scale data center environments. SIMO and Phison gain their foothold in the enterprise SSD market on the strength of cost-effectiveness advantages.

On the supply side, Wallace C. Kou, GM of SIMO, previously stated that prices for NAND Flash in 2Q24 have already been negotiated, with a 20% increase expected. He indicated that some suppliers began to rear profit in 1Q24 and more are expected to rake in money in 2Q24.

According to TrendForce, apart from Kioxia and Western Digital, which have increased their capacity utilization rates since 1Q24, other suppliers have generally maintained a low production strategy. Although NAND Flash purchases in 2Q24 have slightly decreased relative to 1Q24, the overall market situation continues to be affected by reduced inventories and production cuts. The contract price of NAND Flash in 2Q24 is estimated to rise strongly by about 13-18%.

Benefited from the increase in demand from cloud service provider (CSP) in North America and China, it is expected that the procurement volume of enterprise SSD will grow quarter by quarter in 1H24. Due to the low Order Fill Rate (OFR) for high-capacity SSD orders, suppliers still dominate the price trend, and buyers is forced to accept the increased possibility of supplier prices.

Meanwhile, some buyers still attempt to increase their inventory levels before the peak season in 2H24. Therefore, it is estimated that the contract price of enterprise SSD in 2Q24 will increase by 20-25%, marking the highest increase across all product lines.

  1. Consumer SSD Prices Continue to Increase

At the meantime, there’s news in the consumer SSD market. On a wholesale prices basis, a report from Nikkei on April 2 said that the wholesale price (Bulk transaction price) of benchmark SSD products, TLC 256GB, was around USD 28.5 per unit from January to March, an increase of 12% compared to the previous quarter (October to December 2023).

The price of larger-capacity SSD (512GB) was around USD 53.5 per unit, a 10% increase from the previous quarter. Prices have seen consecutive increases for two quarters, implying an expansion of the growth rate compared to the 9% increase in the previous quarter. SSD wholesale prices are set once every season between memory manufacturers and buyers.

Most buyers show willingness to accept the price hike requests from the memory manufacturers for their sake of profit. According to Nikkei, citing a procurement manager from a certain PC manufacturer, the price increase is understandable given that various memory manufacturers are facing losses.

With an increase in market demand and the production reduction strategies of NAND Flash memory manufacturers since 2Q23, SSD prices begun to climb, experiencing significant increases in a relatively short period.

Regarding the upward trend in SSD prices, Phison Electronics’ Pua, Khein-Seng issued a warning in mid-March, stating that further increases in SSD prices could cause a decrease in demand. NAND Flash memory manufacturers should strive to increase production to meet market demand, rather than pare back production to achieve higher demand than supply.

Phison believes that as essential components for fabricating PCs, if memory device prices become too high, it may disrupt the progress of the PC market recovery in the context of a sluggish global economy, which may lead to a shrinkage in demand once again, and ultimately hinder the development of the NAND Flash memory industry.

Industry Urges Supply to Match SSD Demand

With global tech giants like NVIDIA and Tesla accelerating their expansion in artificial intelligence, market demand for storage devices has surged significantly. Major server companies like Dell Technologies and Hewlett Packard Enterprise (HPE) are competing to purchase SSD. Industry sources indicate that server operators, in order to expand memory capacity, have recently placed urgent orders, and some products are even facing shortages, prompting the manufacturers to consider expanding production.

Considering memory manufacturers’ moves, according to a report from “THE ELEC” in mid-March, Samsung Electronics’ NAND Flash factory in Xi’an, China, has resumed operations at a rate of around 70%. In 2H23, Samsung reduced the plant’s operating rate to 20-30%, marking the lowest point since the decline in memory prices and demand began in late 2022.

NAND Flash leading company Kioxia plans to adjust the production cutbacks strategy started in 2022 and increase output. Kioxia expects the utilization rate of its NAND factories to recover to around 90% by March 2024, depending on demand.

On March 27, Micron announced the groundbreaking of its new packaging and testing plant in Xi’an. The new plant is expected to start production in 2H25, and will gradually go into production in response to market demand.

According to TrendForce’s research on March 19th, against the backdrop of an ongoing increase in NAND Flash price lasting to 2Q24, some suppliers will struggle to reduce losses, lower costs, and return to profitability this year. Starting in March, Kioxia/Western Digital was the first to restore capacity utilization to nearly 90%, while other industry players have not significantly increased production scale.

TrendForce also mentioned that to meet the demand during busy season in 2H24, coupled with Kioxia/Western Digital’s low inventory levels, production expansion this time will mainly focus on 112-layer and some 2D products, which are expected to bear fruit this year and further drive the growth rate of NAND Flash industry supply bit to 10.9% in 2024.

In terms of process, as NAND Flash prices reverse in 2024, supplier inventory levels are gradually decreasing. To maintain long-term cost competitiveness, suppliers embarked on upgrading their processes. Samsung and Micron are the most active. It is estimated that the two companies’ output of processes above 200 layers will account for over 40% by 4Q24.

Kioxia and Western Digital’s production focus in 2024 remains on the 112-layer technology. With support from the Japanese government subsidies, equipment installation for 218-layer technology is expected to begin in 2H24, with more optimistic projections for 218-layer output in 2025.

In light of Kioxia’s current process development plan, products beyond 218 layers will directly advance to processes above 300 layers in hopes of accomplishing better cost structure and regaining a top position in both technology and cost aspects.

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(Photo credit: Samsung)

Please note that this article cites information from BusinessKorea and THE ELEC.