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NAND flash memory’s “endless decline” and “pushing seedlings to boost growth”

Since the second quarter of this year, Samsung, a major NAND flash memory manufacturer, has begun to reduce production and raise prices in a two-pronged manner, hoping to save the flash memory market. At the same time, major manufacturers such as Kioxia, Micron, and SK Hynix have also reduced production. The factories reached an agreement on reducing the supply, intending to “pull the seedlings and boost the growth” in the flash memory market.

Although the destocking cycle of the chip industry is gradually coming to an end, there has been no large-scale injection of new demand, resulting in a sluggish market for NAND flash memory. The price has been declining in the first and second quarters of this year. Falling endlessly.”

Samsung and other factories’ efforts to boost growth may slow down the downward trend of NAND flash memory prices to a certain extent, but to what extent it will be effective, in addition to supply and pricing, market demand is still an important factor that cannot be bypassed, and the industry’s popularity cannot be avoided. The indispensable “salary from the bottom”.

NAND flash “falls and falls”

From the end of 2021, the sales of major consumer electronics products such as PCs and smartphones will start to decline, which will not only affect finished products, but also upstream component suppliers. At present, although the destocking cycle of the chip industry is gradually coming to an end, due to the fact that new demand has not yet been injected, the market demand for NAND flash memory continues to slump, and the price also continues to slump.

According to the analysis of Trendforce, the average selling price of NAND flash memory will drop by 10%-15% in the first quarter of 2023, and will continue to decline in the second quarter, but the decline will slow down to 5%-10%. Whether prices will continue to fall will depend on how demand changes. The agency’s previous report estimated that the price of NAND flash memory will continue to decline in the third quarter of 2023, with a decline of between 3% and 8%. The NAND flash memory market is expected to remain in a state of oversupply in the third quarter, given that the trajectory of market demand remains unclear, the report said.

Due to low downstream demand, suppliers have to lower product prices to stimulate market demand in order to maintain profit margins. However, due to the weak demand for servers, smartphones and notebook computers, in the case of oversupply in the NAND flash memory market, simple “price reduction and promotion” cannot effectively solve the problem, but instead make manufacturers more and more pressured to lose money and overwhelmed.

The performance losses of major factories are overwhelmed

According to industry statistics, the global NAND flash memory market size in the third quarter of 2022 is 13.71 billion US dollars, and the total market share of the top five companies in terms of shipments is 95.4%. Among them, Samsung’s business income was US$4.30 billion, accounting for 31.4%; Kioxia’s business income was US$2.83 billion, accounting for 20.6%; SK Hynix’s business income was US$2.54 billion, accounting for 18.5%; Western Digital’s business income was 1.72 billion US dollars, accounting for 12.6%; Micron’s business revenue was 1.69 billion US dollars, accounting for 12.3%.

Since the beginning of this year, the performance of leading NAND flash memory manufacturers has declined significantly.

Samsung Electronics’ sales in China in the first half of this year totaled 17.808 trillion won, a sharp drop of 12.654 trillion won (41.5%) compared with the same period last year. The last time Samsung’s sales in China fell to the 17 trillion won range in the first half of the year, it dates back to 2019 four years ago, when it was 17.814 trillion won.

As early as early August, there was industry news that Samsung intends to increase the quotation of 512Gb NAND Flash wafers to US$1.60, which is about 15% higher than the price of US$1.40 in early 2023. It is not difficult to see from this move that Samsung Electronics hopes to ease the pressure caused by the huge losses in the past by increasing prices.

The financial report data of other NAND flash memory manufacturers also dropped significantly:

As of June 1, 2023, Micron Technology’s fiscal year 2023 third quarter performance, revenue was US$3.75 billion, a year-on-year decrease of 56.6%; GAAP net loss was US$1.9 billion, or a diluted loss per share of US$1.73; non-GAAP net loss was 15.7 billion, or a loss of $1.43 per diluted share.

SK Hynix has a net loss of 2.99 trillion won (about 2.3 billion U.S. dollars) in its Q2 financial report in 2023, and its net profit margin is negative 41%. In fiscal year 2023, SK Hynix’s capital expenditure will decrease by more than 50% year-on-year.

In the face of huge downward pressure on performance, price increases and production reductions have become the unanimous choice of major manufacturers. The production reduction of NAND flash memory suppliers is very important to restore the market supply and demand balance. At the same time, the production reduction and price increase can form a linkage in the two dimensions of supply and demand and price, and promote the formation of a new relative supply and demand balance and price balance, thus jumping out of price declines, A vicious cycle of continuous losses.

Big factories are raising prices and reducing production

Recently, according to Taiwan’s “Business Times” report, Samsung, the world’s leading NAND flash memory company, decided to suspend the quotation of the sixth-generation V-NAND mature process of memory chips, and stop shipments of those below US$1.6 (currently about 12 yuan). This means that the price of NAND flash memory is about to usher in a comprehensive increase.

According to reports, two major manufacturers have confirmed this news, and said that “the previous low price of this product was 1.45-1.48 US dollars (currently about 10.56-10.78 yuan), and it will not appear again in the future.”

With the rising price of NAND flash memory, many factories providing storage solutions have recently announced the suspension of quotations and orders, and announced that they will increase the quotations of original manufacturers by 8%-10%. The current trend of industry price increases has become increasingly clear. The price of NAND is gradually approaching the manufacturing cost line.

According to the Korea Electronics Times report on August 16, in order to overcome the sluggish memory market conditions, Samsung Electronics plans to stop some of its NAND flash memory production equipment at its P1 plant in Pyeongtaek, South Korea.

The production area is mainly responsible for the production of 128-layer stacked 6th generation V-NAND, and the equipment in it will be out of production for at least one month. Some foreign media said that in view of the continued downturn in the market, the industry speculates that Samsung’s NAND flash memory production may be reduced by about 10%.

In fact, Samsung also officially announced the memory production reduction plan in the first quarter 2023 financial report released in April. Subsequently, Samsung even stated in its financial report for the second quarter of this year that Samsung will focus on reducing production in the NAND flash memory field in the second half of 2023.

It is worth noting that semiconductor companies often adopt the “method of keeping equipment running during production cuts and not producing wafers”, mainly because of the additional time and economics required to “re-establish the process and reach production” during restarts if the equipment is completely shut down. Cost, but Samsung is currently considering stopping the operation of the equipment, so it can be seen that Samsung is indeed “determined” to cut costs significantly.

At the second-quarter financial report meeting in late July, in order to accelerate the bottoming out of the storage market, Samsung announced that it would continue to reduce the production of memory chips with NAND flash memory as the core in the second half of the year. SK Hynix also announced that it will reduce NAND flash memory production by another 5%-10% in the second half of the year.

In the face of the “endless decline” and “heavy pressure” of NAND flash memory, Samsung and other original flash memory manufacturers are trying their best to get rid of the vicious circle through dual measures on price and output. Perhaps, with the effect of the reduction of production by the original factory and the effect of the price increase measures, the market supply, demand and price of NAND flash memory will be adjusted to form a new balance, but the stability of the new balance and the recovery level of the industry will largely depend on the electronic Improvement in market demand.