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A true cyclical market, the NAND flash memory sector is going through periods of prosperity and recession. After a very profitable boom in 2018, it seems that the market is in free fall, because an oversupply is starting to affect the results of the memory manufacturers. In order to limit any risk of significant loss or crash in the market, three major NAND memory makers – Intel, Micron and SK Hynix – have announced that they will take action to address the excess supply, such as the reduction of flash production, platelet reduction begins and / or slows the rise of new plants. It is likely that Samsung will follow later.
The fast transition to high-capacity 64- and 96-layer 3D NAND 3D memories has allowed NAND flash manufacturers to increase their NAND offer (measured in bits) and saturate the flash memory charge market. At the same time, the demand for servers in recent months has been lower than expected, the smartphone replacement cycle is increasing and other NAND demand drivers have also disappointed. As a result, the NAND supply has largely outstripped demand, leading to a fall in prices of up to 20% in several categories in the first quarter of 2019, according to TrendForce. To ensure profitability in the short and long term, the three manufacturers announced at different times in recent months that they were taking steps to minimize their exposure during this latest recession.
In March, Micron said it was carefully managing the growth of its NAND bit offer (to at least partially offset the surplus) and had begun to reduce its total NAND platelet sales by about 5% by cutting its nodes. inherited. The company has not indicated its intention to reduce its supply of NAND bits, but reducing memory production with older processing technologies will likely reduce costs.
At the same time, SK Hynix announced this week its discontinuation of production of 36 and 48 layer NAND 3D memories, which are relatively expensive per bit compared to new technologies. In the coming months, the company plans to increase the production of 72-layer NAND 3D and, in the second half of the year, to launch 96-layer 3D NAND solutions for the SSD and mobile markets. In addition, SK Hynix will slow down the ramp-up of its M15 plant in Cheongju, South Korea. The company expects the production of its NAND wafers to decrease by more than 10% compared to 2018. Just like Micron, SK Hynix does not seem to have the intention of reducing its production of NAND bits. It will therefore have more memory than last year.
Intel, which has traditionally focused on the enterprise segment of the SSD market, also announced this week that it will reduce its NAND production in 2019. Intel has not said whether it intends to reduce number of platelet starts or do something more radical. Be that as it may, the company continues to expect NAND memory prices to change, and act accordingly.
Finally, even though Samsung has yet to announce its first quarter results in 2019, it has already warned investors that its earnings for the quarter would be down 60% from the first quarter of 2018. Analysts attribute this to several factors, including the demand for smartphones priced DRAM and NAND memories and other weak markets. Given that other major memory manufacturers are all taking steps to address the current oversupply, it is more than likely that Samsung is also adjusting its NAND business this year; although the way they will do it remains to be seen.
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Sources: Intel, SK Hynix, TrendForce, Micron / SeekingAlpha, Samsung
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