A true cyclical market, the NAND flash business goes through periods of booms and periods of busts. Following a very profitable boom year in 2018, it looks like the market is in a down swing, as an oversupply is starting to impact the bottom lines of memory makers. To stem any potential for significant losses or an outright market crash, three major manufacturers of NAND memory — Intel, Micron, and SK Hynix — have announced that they will be taking measures to address the oversupply, such as reducing flash production, cutting down wafer starts, and/or slowing down ramp ups of new fabs. Furthermore it is highly likely thr another major manufacturer, Samsung, will follow suit.

The rapid transition to high-capacity 64-layer and 96-layer 3D NAND memory devices has enabled NAND flash manufacturers to increase their NAND supply (as measured in bits) and ultimately saturate the market with loads of flash memory. Meanwhile, demand for servers in the recent months has been weaker than expected, smartphone replacement cycles are getting longer, and other drivers of NAND demand have also disappointed. As a result, NAND supply has well exceeded demand, causing prices to fall by as much as 20% across multiple categories in Q1 2019, according to TrendForce. To ensure their short-term and long-term profitability, at various points in the last couple of months the three manufacturers have all announced that they are taking actions to minimize their exposure during this latest bust.

Micron said back in March that it was carefully managing its NAND bit supply growth (to tackle oversupply at least partially) and started to decrease its total NAND wafer starts by roughly 5% by cutting its legacy nodes. The company did not indicate plans to shrink its NAND bit supply, but reducing production of memory using older process technologies will likely lower its costs.

Meanwhile SK Hynix this week said that it had stopped production of 36-layer as well as 48-layer 3D NAND memory, which these days has a rather high per-bit cost relative to newer technologies. In the coming months the company plans to increase production of 72-layer 3D NAND and in the second half of the year it intends to release 96-layer 3D NAND solutions for the SSD and mobile markets. Furthermore, SK Hynix will slow down the ramp up of its M15 fab in Cheongju, South Korea. The company expects its NAND wafer output to decrease more than 10% compared to 2018. Just like Micron, SK Hynix does not seem to have plans to lower its NAND bit production, so it will still more memory than it did last year.

Intel, which has traditionally concentrated on the enterprise part of the SSD market, has also announced this week it will reduce its NAND output in 2019. Intel did not elaborate whether it intended to reduce the number of wafer starts, or do something more radical. But regardless, the company continues to expect challenges with prices of NAND memory going forward, and is acting accordingly.

Finally, while Samsung yet has to announce its Q1 2019 results, it has already warned investors that its profits for the quarter would be down 60% compared to Q1 2018. Analysts have been attributing this to multiple factors, including demand for flagship smartphones, lower prices of DRAM and NAND memory, and other weak markets. Given that the other major memory manufacturers are all taking steps to address the current oversupply, It is more than likely that Samsung will also adjust its NAND business this year; though how they'll do so remains to be seen.

Related Reading:

Sources: Intel, SK Hynix, TrendForce, Micron/SeekingAlpha, Samsung

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  • haukionkannel - Saturday, April 27, 2019 - link

    The prices will come up when Intel gets its 10nm rollin at the third quarter... Many people Are waiting for Ryzen2 and Intel cpu shortage to end. At that moment the ram and nand prices will skyrocket again!
  • bobhumplick - Friday, April 26, 2019 - link

    this is a trick. they know sales are down on the oem side because intel cant meet demand. core count increases and discounts (in response to epic) means for the first time in forever its worth upgrading servers in large numbers.

    on the diy market people are waiting for amd's next gen (intels too, with 8 core 16 thread i7's coming) and amd's new gpus. people are waiting for summer.

    they know this is a good reason to cut back supply without getting labeled as price fixing. but they know demand is gonna spike soon.

    the problem with nand wasnt as bad as dram. but the current prices on nand should hold. not go up. dram should still drop another 10% at least.

    they got to used to all that free money. samsung earnings dropped 60%? dram prices dropped 40-50%. id say its about time and it needs to drop further. i mean high end ram didnt drop that much at all, if any
  • zanon - Saturday, April 27, 2019 - link

    Many people will certainly buy, duh. After all, prices have plummeted in the last 5 years, yet people were buying 5 years ago too. Sure, the total number of units sold might drop but the absolutely number of people buying isn't something they care about. What matters is the profit margin, units x margin per unit. For example, do you think raising prices to go from a 1% margin to a 10% margin would cause the number of units sold to fall by a factor of 10x? Because if not and if they have no other reason to go for share in and of itself it'd be foolish not to do so.
  • Alexvrb - Saturday, April 27, 2019 - link

    They probably won't go up much, but I anticipate price per GB will stagnate again for a while. Sigh.
  • PeachNCream - Friday, April 26, 2019 - link

    In the absence of any easy-to-blame natural disasters, NAND suppliers are forced to simply scale back production to drive prices back into the ceiling in a "clearly not coordinated" action that multiple major suppliers all happened to take at the exact same time in order to engineer a shortage. Oh and we'll have a typhoon, earthquake, or tidal wave to blame later probably.
  • FunBunny2 - Friday, April 26, 2019 - link

    monopolists always know best. just ask any business critter.
  • voicequal - Thursday, May 2, 2019 - link

    Would you do any differently? High prices incentive investment in new tech and production capacity. Not surprising that falling prices have the opposite effect.
  • surt - Friday, April 26, 2019 - link

    "follow the suite." -> follow suit. It's a metaphor derived from the card game bridge.
    (in bridge, whist, and other card games) play a card of the suit led.
    as a metaphor: conform to another's actions.
  • PeachNCream - Friday, April 26, 2019 - link

    And "...smartphone replacement cycle are increasing..." should probably read "..smartphone replacement cycles are increasing..."
  • surt - Friday, April 26, 2019 - link

    Lengthening might be even better.

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