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Supply oversupply is difficult, NAND Flash suppliers continue to slow production

By 21ic
<div>In the past two years, storage products have experienced a shortage of production capacity, skyrocketing prices, increased investment, release of production capacity, and a cycle of falling prices. Whether it is making money or losing money, producers and downstream end users are all at this price. The roller coaster is tormented.</div><div><font face="Poppins"><br></font></div><div>Recently, DRAMeXchange issued a report stating that the NAND Flash market experienced oversupply in 2018, and the main demand performance of notebook computers, smart phones and servers in 2019 is still hard to see. It is expected that the problem of overcapacity will still be difficult. No solution. Under this circumstance, suppliers will further reduce capital expenditures to slow down the expansion process and avoid excessive growth due to excess growth.</div><div><font face="Poppins"><br></font></div><div>According to the DRAMeXchange survey, Korean suppliers took the lead in reducing capital expenditures due to oversupply in 2018. The overall capital expenditure of NAND Flash has been reduced by nearly 10%, but the imbalance between supply and demand is still not reversed. In 2019, US manufacturers reduced capital expenditures, making NAND Flash's overall capital expenditures continue to decline by about 2% from 2018, and the total expenditure was about $22 billion.</div><div><font face="Poppins"><br></font></div><div>In fact, in the first half of last year, NAND Flash experienced a situation of oversupply. For this reason, NAND Flash manufacturers such as Samsung have already begun to reduce capital expenditures. However, this adjustment does not seem to have an immediate effect. Beginning in 2019, Micron and Intel also began to reduce production capacity.</div><div><font face="Poppins"><br></font></div><div>Affected by the adjustment of the supplier expansion plan, although the suppliers have started mass production of 92/96 layer 3D NAND in the fourth quarter of 2018, they will only account for about 32% of the output by the end of 2019, while 64/ The 72-layer output accounted for more than 50%. The slowdown in the supplier's manufacturing process will result in a growth of only 38% in NAND Flash in 2019,a significant drop from the 45% level in 2018.</div><div><font face="Poppins"><br></font></div><div>Observing the capacity adjustment of various suppliers, DRAMeXchange pointed out that Samsung will continue to reduce 2D NAND production capacity, and the 92-layer process will consume more plant space. In 2019, the operating capacity will be lowered from the end of 2018, and the bit output growth rate will drop to about 35. %. As Samsung's global market share is about 30%, the slowdown in Samsung's output growth rate has a greater impact on global output growth.</div><div><font face="Poppins"><br></font></div><div>SK Hynix, Toshiba/Western Digital have M15 and Fab 6 new plant expansions respectively, but they are also affected by the production reduction plan or the old production process, and the annual growth rate of output is lower than expected. SK Hynix and Toshiba/West Digital's original bit output growth rate estimates are about 50% and 40% respectively, DRAMeXchange is expected to be revised down to below 50%, and about 35% of the water level to reflect this year's market demand. The freezing of the new factory in Micron was only officially mass-produced in 2020, so the annual production capacity remained almost unchanged; Intel did not announce other expansion plans except to fill the capacity of the Dalian plant. The overall output of Micron and the Intel camp in 2019 grew by nearly 40%, which is significantly more than the growth of more than 45% in 2018.</div><div><font face="Poppins"><br></font></div><div>So what is the price trend of NAND Flash in 2019? DRAMeXchange pointed out that the decline in contract price quotations from various OEMs in each product line was significantly higher than expected, indicating that they are facing huge inventory pressure. Therefore, in the first quarter of 2019, the quarterly decline in the average price of NAND Flash market may increase from the original estimate of 10% to 20%, and the second quarter offer may continue to fall by nearly 15%. In the second half of the year, there will be demand in the peak season, and the decline is expected to slightly converge, but the price decline in each season will remain at around 10%, depending on whether the original factory can further reduce its own water level.</div><div><font face="Poppins"><br></font></div><div>In summary, DRAMeXchange believes that if there is still insufficient demand for kinetic energy support during the peak season this year, the average price drop of the NAND Flash market may expand to 50%, almost swaying.</div>