DRAMeXchange, a division of TrendForce, reports that the bit output from the NAND Flash industry increased steadily in 3Q18, as suppliers raised the yields of their 64/72-layer 3D NAND production. NAND Flash demand, however, had yet to catch up with supply despite the year-end busy season. The shortage of Intel CPUs and the lower-than-expected sales of new iPhone devices have respectively stifled the demand growths related to notebook PCs and smartphones. Also, the US-China trade dispute has been a negative influence on the whole market. Because the NAND Flash market had been in oversupply since the start of 2018, contract prices of NAND Flash products in 3Q18 registered significant declines from the previous quarter, and the average price drop was 10-15%.
“The market for NAND Flash is expected to remain in oversupply during 4Q18, with steeper price decline for various NAND Flash products,” says DRAMeXchange analyst Ben Yeh. Memory module makers and OEMs are now at the end of their preparation for the year-end holiday season in North America and Europe, so they are reluctant to extend their inventories now. In addition, the US-China trade dispute simmers, leading to weaker demand. Particularly, price competition is intensifying in the markets for Enterprise SSDs and NAND Flash wafers. NAND Flash suppliers are concentrating on Enterprise SSD market to retain gross margins and on wafer market for greater digestion of inventories.
Samsung’s NAND Flash revenue for 3Q18 rose by 2.1% QoQ to US$6.05 billion. Although demand was lower than anticipated for the busy season, Samsung maintained a QoQ growth of more than 20% in bit shipments because it has remained the dominant supplier of NAND Flash for flagship smartphones and recorded increasing shipments of its SSDs for PCs and servers. Nevertheless, falling prices across the market also resulted in a near 15% QoQ decline in Samsung’s ASP.
Samsung’s consumer-grade SSDs (for the channel market) are presently using 3D NAND Flash made with the fifth-generation manufacturing process. The process will be progressively applied to the production of Client SSDs for PC-OEMs and UFS mobile solutions. Because the oversupply problem has grown to become more significant since the start of 2018, Samsung will slow down the pace of the process migration during 2019. This also means that the mainstream architecture in the NAND Flash market during 2019 will still be 64/72-layer 3D NAND.
SK Hynix’s NAND Flash revenue for 3Q18 advanced by 6.0% QoQ to US$1.83 billion. SK Hynix gained from the seasonal growth in smartphone shipments and the steady growth of its SSD sales. As a result, its bit shipments for the quarter also grew by 19% QoQ. Still, SK Hynix posted a 10% QoQ decline in its ASP because the demand growth was smaller than anticipated and not enough to offset the effect of oversupply.
SK Hynix continues to concentrate on product sales in the mobile storage market. Its shipments of mobile solutions that are 128GB or higher have expanded noticeably following the releases of smartphones with higher-end specifications (e.g. the new iPhone devices and Chinese branded smartphones featuring an all-screen front). The success in the mobile storage market has also sustained the growth of the supplier’s bit shipments. In the SSD market, SK Hynix has been focusing on the sales of products based on 72-layer 3D NAND Flash. Consequently, SSDs accounted for more than 20% of SK Hynix’s total bit shipments in 3Q18.
The demand growth resulting from the traditional busy season and the release of the new iPhone devices enabled Toshiba’s bit shipments to increase by more than 20% QoQ in 3Q18. However, falling prices in the end market caused Toshiba’s ASP to drop by almost 15% QoQ in the same period. Taken together, Toshiba posted a small increase of 1.9% QoQ in its quarterly revenue, totaling US$3.2 billion.
The recent survey of Toshiba’s capacity and technology plans shows that the share of 64-layer 3D NAND production in the supplier’s total output has already surpassed 70%, and more than 50% of the supplier’s total production capacity is devoted to 3D NAND Flash. Additional production capacity for Toshiba during 2019 will come from the expansion of its Fab 6. Considering the market oversupply and the maturity of the supplier’s technology, Fab 6 will primarily manufacture products based on 64-layer 3D NAND.
Western Digital increased its bit shipments by 28% QoQ in 3Q18. This impressive shipment growth was attributed to the supplier’s advantages in the retail and channel market as well as the strong sales of its economically priced SSDs. In the same quarter, Western Digital also began to ship its high-density UFS products. On the other hand, the supplier’s ASP fell by 16% QoQ because of the general price slump for NAND Flash products. Western Digital’s 3Q18 revenue came to US$2.534 billion, amounting to an increase of 7.0% QoQ.
In response to the oversupply problem during 2018, Western Digital will be limiting its CAPEX for 2019 and will scale back its future capacity expansion efforts. Hence, Western Digital is expected to slow down slightly with respect to the capacity expansion and the development of 96-layer 3D NAND Flash in 1H19.
Micron’s bit shipments in 3Q18 surged by more than 25% QoQ owing to the busy season in the smartphone market and the increase in the sales of its SSDs. Nevertheless, Micron still exerts great influence over the channel market. And because of the steep price drops in the channel market, Micron’s ASP fell by nearly 15% QoQ in 3Q18. All things considered, the supplier’s revenue for the same quarter rose by 14.7% QoQ to US$2.23 billion.
To improve its cost structure, Micron has been decreasing the shipment share of products for the channel market. The company’s primary aim in the SSD market is to release products featuring both the NVMe interface and QLC NAND Flash in order to meet the demand for high-density storage. In the mobile storage market, Micron is continuing its collaboration with Chinese suppliers and searching for more opportunities in that country. Micron also began making product shipments in China during 3Q18.
In 3Q18, Intel’s bit shipments kept growing at a QoQ rate of more than 10% due to its long-term dominance in the Enterprise SSD market. Despite prices spiraling downward in the NAND Flash market, Intel was able to keep the decline of its ASP just slightly larger than 9% QoQ. Its revenue performance remained relatively constant from the previous quarter, totaling US$1.08 billion. On the other hand, Intel reached its peak profit for this year in the third quarter thanks to the cost reduction associated with the increased use of 64-layer 3D NAND Flash in its SSDs (over 50% of its total SSD shipments in 3Q18).
The additional production capacity made available by the second-phase expansion of Intel’s Dalian fab came online in 3Q18, and will achieve full capacity in 1H19. In addition, Intel and Micron have terminated their cooperation in the field of non-volatile memory. Although Micron will be acquiring the remaining interest in IM Flash Technologies, Intel can still use the Lehi plant for the production of 3D XPoint until the end of 2020. After that, however, Intel is on its own in the development of the third-generation of 3D XPoint products, so Intel will likely set up in-house production for this type of memory in the future.