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DRAMeXchange indicates NAND Flash demand recovery in upcoming seasonal upturns

2 September 2008 Semiconductors

Taipei, August 26, 2008 --- According to DRAMeXchange, demand for NAND Flash might have weaker expectation in 2H08, but a better sales recovery may be seen during the upcoming seasonal upturns as a sharp ASP slump may encourage consumption. Consumption of NAND Flash related product is being shadowed by the subprime woes, resulting in a weaker-than-expected sales growth in 2H08. But given that mainstream NAND Flash ASP has slumped over 80% since 3Q07, a more favorable pricing stimulus is thus seen. Expected demand recovery may be seen during the upcoming week-long holiday in China during early October, Thanksgiving Day and Christmas. Under an anticipation of better sales recovery, an oversupply in 3Q08 is also likely to improve towards a more balanced NAND Flash market in 4Q08. NAND Flash demand bit growth is estimated to grow 141% YoY at 30681mn Gb in 2008, down from the bit growth of 151% YoY in 2007.

NAND Flash pricing is likely to stabilize or post a mild bounce when traditional hot season demand gradually recovers after August. Buoyant sales of Apple 3G iPhone after its launch in mid July provided a positive sign for NAND Flash demand. When Hynix later announced to further trim its 2008 bit supply in late July, market sentiment was encouraged in the short term. Yet, loads of uncertainties still exist in the NAND Flash market in 4Q08, therefore, industry players are generally seeing a hazy demand visibility. Most buyers are being cautious over procurement in order to keep their inventory at healthy level.

Most NAND Flash makers are maintaining their 2008 bit growth target static, except for Hynix. The Korean chipmaker has revised down its 2008 bit growth output guidance from a 90-100% YoY growth to 50-60% YoY growth. Amid the change, NAND Flash supply bit growth is expected to be 146% YoY to 31919 mn Gb in 2008, up mildly from the bit growth of 144% YoY in 2007. Oversupply is still going to loom the market in 2008.

Given that the NAND Flash market is expected to see oversupply & heavy price erosion in 2008 and uncertain macroeconomic factors in 2009, so far major NAND Flash makers have no concrete plan for their capacity expansion and capex in 2009 yet. Most are believed to maintain flexible to cope with any unexpected situation in the future. NAND Flash makers are also expected to accelerate their deployments in killer application – SSD. While establishing new industrial standards & performance comparison benchmarks, NAND Flash makers will also dedicate more efforts to develop advanced process technology & new architecture design to deliver an enhanced Price/Performance ratio and spread the influence to more diversified applications.

2H August NAND Flash contract price review

NAND Flash contract price of 2H August fell at the range between 0 to 13%. Market has so far expected demand driven by traditional peak season after August. Therefore, most buyers are more careful with purchasing in August. And this has relatively led to weaker market demand. Due to uncertain factors remained in 4Q08, market outlook for NAND Flash is more conservative with expectation after summer Olympic Games in China and back-to-school demand in Europe and the U.S. The price is likely to stabilize and gradually rebound as the traditional hot season stocking demand recovers.

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