According to TechNews’ report, in the midst of production cutbacks by Samsung, SK Hynix, and Micron, NAND Flash wafer prices are surging.

As the traditional peak season for end-user stockpiling comes to an end, memory module manufacturers wish to position themselves favorably during a dip in demand. However, the reduced supply resulting from production cutbacks paradoxically elevates the demand for NAND Flash, intensifying the momentum of price rebounds. Memory module manufacturers are left with no choice but to accept the price increases imposed by memory manufacturers.

Fueled by the expectation that memory manufacturers will continue to raise prices, memory module manufacturers continue aggressive purchasing, contributing to an upward price trend in December.

Major memory manufacturers Samsung, SK Hynix, and Micron had previously announced significant production reduction plans. Samsung initiated a decrease in NAND Flash production from the second quarter and further expanded the reduction to 50% of total capacity in September, focusing mainly on products with less than 128 layers. This move instilled confidence in price hikes among industry peers.

Due to the unexpectedly substantial reduction in production by major memory manufacturers, coupled with generally low inventory levels on the client side, NAND Flash prices continue to rise.

In the latter half of this year, the demand for Mobile DRAM and NAND Flash (eMMC, UFS) has not only been driven by the traditional peak season but also stimulated by the production expansion goals of other Chinese smartphone brands, including the Huawei Mate 60 series. This sudden influx of demand is contributing to the price hikes in fourth-quarter contracts.

The most significant price surge in this wave is undoubtedly in NAND Flash wafer prices. According to the latest research from TrendForce, the current industry situation indicates that module manufacturers’ inventories have rapidly depleted due to increased orders from customers. This has prompted module manufacturers to turn to memory manufacturers, requesting expanded supply.

However, with memory manufacturers persisting in their production reduction strategies, the imbalance between supply and demand has led to a robust rebound in NAND Flash wafer prices in the fourth quarter. According to TrendForce’s data, the month of November alone witnessed a price increase of over 25% for NAND Flash wafers.

Industry sources reveal that in the current scenario of limited supply and significantly increased demand, module manufacturers have no choice but to accept the forceful price hikes imposed by memory manufacturers. The industry, anticipating that memory manufacturers will continue to raise prices, has resulted in a situation where “Everyone just keeps scrambling for inventory.”

Based on the current market conditions, TrendForce believes that in December, with tight supply, NAND Flash prices will continue to rise. However, whether prices will continue to surge significantly in the first quarter next year depends on the production reduction strategies of NAND manufacturers and the state of demand.

It is reported that there are industry rumors suggesting that some memory manufacturers are considering increasing production capacity due to the strong downstream demand. If memory manufacturers decide to increase its capacity earlier, coupled with unclear improvements in demand, the extent of price increases may be noticeably limited.

(Photo credit: Samsung)

According to South Korean media Chosun Biz’s report, the prices of all memory products, encompassing servers, mobile devices, and PCs, are on the rise. This trend, combined with the thriving development of the AI market, is expected to result in even higher profitability for High-Bandwidth Memory (HBM) than initially anticipated.

Major memory manufacturers Samsung and SK Hynix are beginning to emerge from a business downturn, leading to upward revisions in their financial outlook for the fourth quarter of 2023.

The report notes that the adjustments in Q4 financial outlook by Samsung and SK Hynix indicate a rapid increase in demand for HBM due to the thriving AI market. Additionally, the recovery of the largest sales item, DRAM, is contributing to better operational performance for both companies in the fourth quarter.

Market experts reveal that Samsung’s projected operating profit for Q4 is expected to be KRW 3.487 trillion, showing slight growth compared to the estimate from a week ago. As for SK Hynix, the expected loss in Q4 is KRW 294.4 billion, reflecting a convergence from the market estimate of KRW 335.3 billion a week earlier, despite remaining in a deficit.

In addition, Micron, the American company considered one of the three major global DRAM manufacturers along with South Korean companies Samsung and SK Hynix, has also revised its financial forecast for the first quarter of the 2024 fiscal year.

The initial estimate in November of USD 4.4 billion has been adjusted to USD 4.7 billion , while the expected Earnings per Share has been raised from USD -1.07 to USD -1.

Regarding trends in the memory industry, TrendForce indicated in a recent report that a key turning point in the third quarter for the NAND Flash market was Samsung’s decision to actively reduce production.

Previously, buyers maintained a low inventory and slow procurement strategy due to concerns about low visibility of end demand and worries about a lackluster market peak season. With the leading supply-side companies significantly reducing production, buyers, anticipating a significant reduction in supply, have shifted to a more positive procurement attitude. By the end of the third quarter, contract pricing for NAND Flash had shifted toward stabilization and even price increases.

TrendForce predicts that NAND Flash products will experience both increased volume and prices in the fourth quarter. The average selling price for all products is estimated to increase by 13%, and the overall revenue growth for the NAND Flash industry in the quarter is expected to exceed 20%.

Contrarily, in the case of DRAM, prices have been on a downward trend since 2023, but they started to rise from October. TrendForce believes that the three major global DRAM manufacturers have begun intensive production cuts, and as market demand begins to recover, the pricing power of memory manufacturers is gradually increasing.

In terms of DRAM supply in the fourth quarter, memory manufacturers have a clear upward pricing attitude, as TrendForce projects a noticeable increase of approximately 13-18% in contract prices during this period. However, the recovery in demand is not as strong as in previous peak seasons.

Overall, while there is demand for stocking up, in the current scenario, the server sector remains passive in terms of procurement due to high inventory levels. The shipment growth in the DRAM industry for the fourth quarter is expected to be limited.

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(Photo credit: Samsung)

Following the Singles’ Day Sale in China, demands are relatively cooled down. While for DRAM spot prices, market experiences fluctuations due to subdued demand and increased supply of used chips. In contrast, NAND spot price remains relatively strong under the ongoing reduction in supply.

DRAM Spot Market

Following the Singles’ Day promotional events in China, demand has cooled down compared with the previous few weeks. Looking at DRAM spot prices, prices for chips from suppliers have remained steady, but there has been an influx of used chips stripped from decommissioned modules. Spot prices of used DDR4 chips have now fallen to US$1.05, significantly lower than the spot price of around US$1.75 for new chips from suppliers. Spot prices of DDR5 chips, on the other hand, have remained relatively stable. However, Kingston has not raised module prices, making it difficult to sustain the upward momentum. The average spot price of mainstream chips (DDR4 1Gx8 2666MT/s) rose by 1.54% from US$1.683 last week to US$1.709 this week.

NAND Flash Spot Market

Demand from the spot market has become even more enervated after China’s Double 11 shopping festival when compared to that of several weeks ago. In terms of spot prices, the mainstream 512Gb wafer is supported by suppliers’ ongoing diminishment of wafer provision, and continues to march towards US$2.7-US$2.9 at a relatively robust tendency in comparison with DRAM spots, despite poor demand. 512Gb TLC wafer spots have risen by 11.54% this week, arriving at US$2.862.

Stepping into the fourth quarter of 2023, the memory market is witnessing a comprehensive uptick in DRAM and NAND Flash prices. This surge, attributed to the gradual impact of companies’ production cuts and sustained robust demand in specific application markets, is poised to continue into the first quarter of the following year.

TrendForce’s analysis reveals an estimated 13-18% increase in Mobile DRAM contract prices for the fourth quarter, while eMMC and UFS NAND Flash contracts are expected to see a rise of about 10-15%. Looking forward to the first quarter of 2024, the upward trajectory in overall memory prices is anticipated to persist. The contract prices for Mobile DRAM and NAND Flash (eMMC, UFS) are expected to continue ascending, contingent on whether companies uphold a conservative production strategy and if there’s tangible consumer demand support at the end.

The memory market, coming out of its challenging phase, is not just experiencing increases in prices but is also anticipated to gain momentum from various factors contributing to its revival.

AI-Driven Surge in Smartphone Memory Capacities

According to reports from Wccftech, a notable trend in 2024 is the rise of terminal AI, now integrated into various chipsets like Snapdragon 8 Gen 3, Dimensity 9300, and Exynos 2400. Smartphones with AI demand more memory, with the expectation that Android phones featuring built-in AI will require a minimum of 20GB RAM.

While 8GB RAM remains the standard for Android phones, there are now phones in the market boasting higher RAM capacities than most laptops or PCs, though it has yet to become ubiquitous. Industry experts suggest that to smoothly execute AI image feature in the future, Android phones will need at least 12GB RAM. Considering AI applications and other features, phones will require over 20GB RAM for seamless operations.

Given that numerous Android phone brands are actively investing in AI, 2024 is poised to make AI a focal point for devices. Consequently, the industry underscores that as RAM requirements rise, hardware specifications become more crucial than ever for modern AI devices.

Noteworthy Growth in DDR5 Market Demand

Industry experts anticipate significant growth in demand for the DDR5 market, fueled by decreasing prices and the continuous improvement in companies’ yields.

As a high-value-added DRAM, DDR5 continues to garner favor from major players. Micron recent announcement of DDR5 memory based on 1β technology, boasting speeds of up to 7200 MT/s, signifies a shift toward the data center and PC markets.

Recently, Micron also introduced a 128GB DDR5 RDIMM memory utilizing 32Gb chips. This series boasts speeds of up to 8000 MT/s and is suitable for server and workstations. Employing Micron’s 1β technology, these series contribute to a 24% improvement in energy efficiency and 16% reduction in latency. Furthermore, Micron plans to launch models with speeds of 4800 MT/s, 5600 MT/s, and 6400 MT/s in 2024, with an upcoming model featuring a speed of 8000 MT/s in the future.

In terms of Samsung, it is reported to expand its DDR5 production line. Given the high value of DDR5 and its adoption in the PC and server markets, this year is considered a “year of large-scale adoption of DDR5.”

Improvement in HBM Supply Situation

Similar to DDR5, HBM, a high-value-added DRAM, has attracted significant attention this year. Fueled by the AI trend, the demand for the HBM market has surged, leading to an expansion in HBM production capacity.

TrendForce’s research indicates that looking ahead to 2024, the HBM sufficiency ratio is expected to improve, shifting from -2.4% in 2023 to 0.6%. With the AI boom driving demand for AI chips in 2023 and 2024, companies are increasing HBM capacity, anticipating a significant improvement in the HBM supply in 2024.

In terms of specifications, as the performance needs of AI chips increase, it’s anticipated that HBM3 and HBM3e will become the dominant choices in 2024. In general, with a rise in demand and the higher average selling prices of HBM3 and HBM3e compared to older versions, the revenue from HBM is expected to experience significant growth in 2024.

(Image: Qualcomm)

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As the memory market faces oversupply and falling prices due to declining demand in 2023, there’s a glimmer of hope when looking into their Q4 guidance. Memory prices are gradually rising, indicating a potential escape from the market’s low point. The most recent financial reports from the world’s top five companies substantiate this positive outlook.

1. Mixed Results in the Financial Reports of Top 5 Giants

From the recent financial reports of Samsung, SK Hynix, Micron, Kioxia, and Western Digital reveal a slowdown in the rate of revenue loss despite some reporting losses. Some companies express optimism, noting a gradual recovery in certain downstream demand.

Samsung: Anticipating Q4 Demand Recovery

Samsung Electronics’ Q3 financial report shows a revenue of 6.74 trillion Korean won, a YoY decrease, but with a net profit exceeding expectations at 5.5 trillion won.

During their earnings call on October 31, Samsung highlighted the uncertainty in the recovery of the storage chip market. However, they remain optimistic about increased demand in Q4, driven by year-end promotions, new product releases from major clients, and growing demand for generative AI.

SK Hynix: Positive Signs in Market Conditions

SK Hynix’s report for the Q3 2023 fiscal year indicates improving market conditions, particularly due to increased demand for high-performance memory, especially in AI-related products. DRAM and NAND flash memory sales have grown, with a significant 20%  QoQ increase in DRAM shipments. Rise of average prices also impacts the results. In the second half of the year, customers with reduced inventory are progressively increasing their procurement demands, leading to stable developments in product prices.

Micron’s performance for the Q4 2023 fiscal year shows revenue of $4.01 billion, a 40% year-on-year decrease but better than market expectations. The DRAM business accounts for 69% of revenue, with $2.8 billion in revenue, an increase in bit shipments but a decrease in average selling price. NAND Flash revenue is $1.2 billion, with an increase in bit shipments but a decrease in ASP.

Micron expects Q1 revenue for the 2024 fiscal year to reach $4.2~4.6 billion, anticipating a recovery in the storage market in 2024 and further improvement in 2025.

Kioxia: Rebound in NAND Prices

Kioxia released its financial report for July to September 2023, with revenue of 241.4 billion yen, a 3.9% decrease QoQ and a 38.3% YoY decrease. Due to a decline in demand for smartphone and PC memory chips, the operating loss was 100.8 billion yen in the Q2. However, benefiting from the improvement in storage supply-demand balance, optimized storage portfolio, and the performance of the yen exchange rate, the operating loss has improved.

Although NAND shipments have decreased, the situation has improved due to the rebound in NAND prices. NAND bit shipments decreased by approximately 13%, and NAND ASP increased by about 8%. Looking ahead to 2024, Kioxia expects NAND prices to continue to rise with the original equipment company’s production reduction strategy and customer inventory normalization. Confidence in the NAND market’s recovery is expected, especially in data centers and enterprise SSD demand, after the first half of 2024.

Western Digital: Cloud Market Continues to Grow

Western Digital announced Q1 revenue for the 2024 fiscal year, totaling $2.75 billion, a 3% increase QoQ and a 26% YoY decrease. In the end market, the decline in flash memory prices was offset by the growth in flash memory shipments, driving some business growth on a QoQ basis.

CEO David Goeckeler stated that Q1 performance exceeded expectations, with profit margins for flash memory and HDD business continuously improving. He pointed out that the consumer and end-user markets performed well, and the cloud market is expected to continue growing. With market improvement, an improved cost structure enables the company to increase profitability.

2. Changing Supply and Demand Dynamics: Some Applications Boosting

Storage companies are adapting to the market by reducing capital expenditures and adjusting inventory, leading to a more normalized market inventory. Simultaneously, increased demand in AI servers, high-performance computing, and automotive intelligence instills confidence in the market.

In the second half of the year, there are clear signs of improvement in the supply and demand dynamics of storage chips. Demand for smartphones, laptops, and new product releases is driving positive trends. Some companies are witnessing strengthened customer demand, even accepting price increases.

In the server sector, AI servers are boosting demand for high-bandwidth memory (HBM), and DDR5 adoption is accelerating. In the automotive storage sector, electric vehicles, intelligence, and networking are propelling in-car storage demand, indicating promising developments in the automotive storage market. Other applications such as big data, cloud computing, and wearable devices related to high-speed storage, reliability, and data security also present growth potential, benefiting storage companies.

3. Comprehensive Rise in Storage Chips: Is a Turning Point Near?

According to TrendForce, the global NAND Flash market has experienced a comprehensive price increase in the Q4, driven by suppliers’ active production reduction strategies in 2023. Data from TrendForce indicates a general rise in Q4 NAND Flash contract prices, with an increase of about 8-13%.

TrendForce estimates a negative annual growth rate of -2.8% for supply in 2023, the first in several years. This has pushed the overall sufficiency ratio to -3.7%, forming the basis for stabilizing NAND Flash prices in the second half. However, the sustainability of the current upward trend remains unclear due to the lack of substantial terminal demand.

If demand recovers as expected in the second half of 2024, especially with the momentum of AI-related orders for server SSDs and a cautious approach by suppliers in resuming capacity utilization, the overall sufficiency ratio is expected to be controlled at -9.4%, accelerating the balance between supply and demand, and NAND Flash prices may show an upward trend throughout the year.

For DRAM, TrendForce predicts a seasonal increase of about 3-8% in DRAM contract prices in the Q4. The continuation of this upward trend depends on whether suppliers maintain their production reduction strategy and the actual recovery of demand, particularly in the general server.

During the MTS 2024 Storage Industry Trends Seminar, TrendForce highlighted three concerns for the memory market in 2024:

(1) Despite the reduction in inventory levels, it is essential to observe whether this reduction can be sustained and effectively transferred to buyers.

(2) Anticipating a rise in production capacity, an early recovery in operational rates due to market improvements may lead to another imbalance in supply and demand.

(3) Whether the demand from various end-users will align with the expected recovery or not, particularly the sustainability of orders related to AI.
(Image: Samsung)