 NAND Flash Prices: Stability in Sight?
Prices have been on a strong and steady upwards trend, leaving downstream vendors, USB flash drive manufacturers and wholesale traders to buffer out the general recovery of NAND flash memory prices.
Let's have a look back at what happened, analyze the current NAND market trends and come up with a forecast and a general outlook on the price landscape for NAND flash memory during 3rd/4th Quarter.
Reaching the tipping point just before end of Dec. 2008, the spot prices for NAND flash memory have been on a steady upward trend since. Additionally, several significant price jumps occurred throughout the first months of 2009. NAND prices hiking up quickly and at very tight supply, what had happened?
Triggered ultimately by the lowered market demands from consumers and customers from key markets in Europe and the US, some of the core players in the semiconductor industry started to significantly cut down on their wafer outputs of NAND flash memory chips, while concentration on fulfilling contractual volume orders for device producers and suppliers such as e.g Apple Computer Inc.
Several of the big players such as Hynix, SanDisk and Toshiba shifted their focus to the contractual markets to service their core customers for large volume contractual NAND flash wholesale orders, while at the same time reducing production capacities - sometimes even closing entire production plants - in order to better meet the new market demand for NAND and adjust output to the general situation. This shortage in supply of NAND flash memory, where now a considerable share of the total output goes to fulfill volume orders has lead to a re-shuffling of positions and capacities in many parts of the supply chains relevant for USB flash drive manufacturers and downstream storage device suppliers.
The nature of the NAND flash spot market makes it very much exposed to the mood of it's bigger counterpart in the supply chain, the contractual NAND flash market. High-volume contractual orders from get priority handling by NAND flash memory producers and the price trends on the spot market are defined by overall output capacities and the seasonal situation of the main contract productions.
Samsung is building up further momentum on the NAND flash market and has managed to secure more market shares. Backed by their own NAND flash demand, needed mostly for their expanding mobile and handheld divisions, Samsung is currently supplying most capacities and with a strong hold on the main market share. Competition to Samsung comes mostly from Intel and Micron, with the occasional Hynix memory batch, usually for mid-capacities and not always available.
As a result of the raising prices during end of 4Q 2008, and facing the outlook of a slow but constant price recovery during the entire year, many upstream suppliers and manufacturers started to flush out their inventory before Chinese New Year, as reported back in January: Flash Prices: NAND Prices Increasing.
Thus, when the market re-opened in the New Lunar Year inventories where flushed and most vendors and wholesale traders started from scratch and by placing short-term rush orders for mostly lower volumes, even turning down high-batches as any significant price increase would easily mean severe losses when trading with large-volume NAND flash batches. Up until the last weeks trades where mostly instantly and NAND purchasers struggled to buffer out the upwards price trend by reducing risks and buying low-risk and on short-term demand to meet order requirements. So, NAND supply was tight, leading to occasional supply shortages and frequent - sometimes daily - price updates on the main NAND flash spot market in Hong Kong.
Then came the day when Apple placed an order for 100 mill. units 8GB flash for the 16GB/32GB iPhone revision that Apple is going to launch this year. The rumors of this big order started to hit the streets early April. The order itself was placed mostly with Samsung, and needless to say this sent huge ripples across the entire NAND industry and especially the global hub for the NAND spot market in Hong Kong was hit by an immediate double-digit price increases for most capacities.
Several USB flash manufacturers and vendors are now starting to stock up inventory again to protect against similar price peaks in future and to recover better negotiation positions during market trade.
Therefore some voices among the players on the NAND flash spot market suggest that this event of Apples' 100 mill. 8GB order might mark the peak of the upwards price trends for NAND flash memory we've seen during the last months.
We at MemoTrek expect the NAND flash prices to keep current levels throughout the next quarters, with a slow increase and hopefully with more stability and better predictability. This market trend may very well continue also after the summer season, depending on how this years end-of-year sales in 4Q will develop. Other factors, such as new products launched by device vendors early 4Q might influence the order structure on both contractual NAND flash market and the spot market for flash memory.
IC controllers are expected to catch up with the latest low-range nanometer NAND flash wafer technology later on during this year, and will then be better compatible with e.g the Micron 34nm chips and chips by other vendors in the sub 40nm range. This will mean a big technological breakthrough for the industry and we'll then be able to see bigger NAND flash capacities entering the market to form high-capacity solutions to a much lower cost than possible with today's IC controllers.
This year we're expecting a relatively low demand during the 4Q end-of-year seasonal sales from the traditionally high-demand and thriving markets of Europe and the US. However, it is also possible that we'll see increasing price competitions between vendors throughout the 4Q:
USB manufacturers and wholesale vendors who use new nanometer technology, high-capacity NAND flash with improved IC controllers to deliver low-cost solutions in the 16GB/32GB range will compete with their technological implementations for tight market demand from previous core markets.
Emerging markets in countries such as Brazil, Argentina, Dubai, Pakistan, the Middle East, and countries such as the Philippines, Malaysia and Indonesia here in Asia are starting to build up weight and gain importance. Here demand is still on the rise and the markets for USB flash drives is still very vibrant and with a lot of growth potential.
This growing influence of emerging markets might in fact lead to a further price consolidation on the NAND flash spot market, as high market diversification can lead to a more balanced overall pricing.
We at MemoTrek share our many years of market experience, trade knowledge and unique upstream position with our trade partners, wholesale members and key customers. For questions or comments regarding wholesale trade of large-volume batches of NAND flash memory feel free to contact us for a personalized suggestion on how to optimize your purchase strategy and increase your return and profits.
Contact MemoTrek for professional assistance on USB wholesale purchases now!
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