Demand has exceeded supply in the global NAND Flash market for six consecutive quarters since the third quarter of 2016, according to the latest research from DRAMeXchange, division of TrendForce. During this 2017, NAND Flash demand continues to expand because of the increase in average memory content of smartphones and the strong server market. At the same time, the growth in NAND Flash supply has been constrained by the pace of the major suppliers’ respective technology migrations, which in general have been slower than anticipated.
On the other hand, DRAMeXchange’s NAND Flash market outlook indicates that supply and demand will reach a balance in 2018, moving away from the undersupply situation of 2017. In terms of annual changes in supply and demand for 2018, the global NAND Flash bit supply growth rate is currently projected at 42.9%, while the bit demand growth rate is projected at 37.7%.
“The progress bottleneck in the transition from the 2D-NAND to the 3D-NAND manufacturing for non-Samsung suppliers has been the main reason why the NAND Flash supply has been tight through 2017,” said Alan Chen, senior research manager of DRAMeXchange. “Some losses of production capacity occurred as non-Samsung suppliers strive to improve their respective 3D-NAND production processes. At the same time, suppliers have been unable to effectively utilize the additional capacity that they have taken on.”
Looking ahead, Chen pointed out that the non-Samsung suppliers are expected to reach maturity in the development of their respective 64-and 72-layer stacking technologies in 2018. Next year’s bit supply therefore is forecast to grow significantly by an annual rate of 42.9%.
As for the NAND Flash demand during 2018, the conventional seasonal effect in the next first quarter will cause shipments of end devices (e.g. smartphones, tablets and PCs) to drop sharply from the fourth quarter of 2017. As result, the NAND Flash market will temporarily swing from undersupply to oversupply. Nonetheless, the overall market trend for the whole 2018 is toward a stable equilibrium of supply and demand.
3D-NAND to represent over 70% of the global NAND Flash bit output for 2018; Samsung to retain its technology leadership
With non-Samsung suppliers facing challenges in switching from 2D- to 3D-NAND Flash production, the share of 3D-NAND products in the global NAND Flash bit output for 2017 is estimated around 50%. Next year, the major non-Samsung suppliers – SK Hynix, the Toshiba-Western Digital alliance and the Micron-Intel alliance – will further raise the share of their respective production capacities based on the 3D-NAND process. Hence, the percentage of 3D-NAND products in the global NAND Flash bit output for 2018 will cross the 70% threshold.
In terms of suppliers’ respective technological developments, Samsung has begun mass producing 64-layer 3D-NAND Flash since this third quarter. By this fourth quarter, the 3D-NAND process will represent more than 50% of Samsung’s total NAND Flash capacity. Next year, this share figure may reach as high as 60% to 70%.
SK Hynix for now mainly uses the 48-layer stacking technology, but its 72-layer stacking will account for a larger share of its production capacity next year. Around 20% to 30% of SK Hynix’s total NAND Flash production capacity will be based on the 3D-NAND process in the fourth quarter of 2017. This share figure is forecast to grow to 40% to 50% by the fourth quarter of 2018.
Toshiba and its partner Western Digital were also mainly producing 48-layer 3D-NAND Flash during the first half of 2017. Around 30% of this alliance’s total NAND Flash production capacity will be based on the 3D-NAND process in the final quarter of this year. Their 3D-NAND capacity share target is to surpass 50% by the fourth quarter of 2018.
Toshiba started the construction of its Fab 6 this March, and the facility is scheduled to begin producing the latest 3D-NAND products in 2019. Fab 6, which is located in the Japanese city of Yokkaichi, is also a joint investment between Toshiba and Western Digital. Toshiba’s decision to sell its memory business to the consortium led by Bain Capital has created a major rift in its relationship with Western Digital. Therefore, when Fab 6 will be in operation is still uncertain.
Micron and Intel achieved economies of scale for their 32-layer 3D-NAND Flash process during the first half of 2017 and have quickly advanced to the 64-layer stacking technology this third quarter. Currently, their 64-layer process has reached the yield rate required for mass production. In this fourth quarter, the 3D-NAND process is expected to account for 40% to 50% of Micron and Intel’s total NAND Flash production capacity. Going forward, Intel plans to expand its NAND Flash fab at Dalian, China. The 3D-NAND capacity share of the Intel-Micron alliance is forecast to reach 60% to 70% in the fourth quarter of 2018.