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The original factory cuts investment in new production capacity, and the bottom of the memory market drops?

The sharp decline in consumer electronics this year has led to a weakening of the market for a large number of components, including memories represented by DRAM memory and NAND flash memory. As a typical representative of “long material”, memory has not shown much performance in the previous wave of lack of cores, but now the industry demand has dropped sharply, and the market is even more “collapsed”.


Based on market data from the flash memory market and TrendForce, the representative DDR4 8Gb memory in the DRAM market has dropped by about 20% in the past six months, and the SSD, eMMC and UFS categories in the NAND flash memory market have generally increased by 20% to 30%. As the destocking of the industry chain is still not optimistic, the decline of various types of DRAM and NAND flash memory in the fourth quarter will exceed the original expectation.

 


The market has not improved, and major manufacturers have also tightened their expectations and expansion plans. Micron announced in late September that it will reduce the production of DRAM and NAND flash memory, and will delay the rollout of 232-layer NAND flash memory products. Layer is the main process. Following this, Kioxia also announced that it will reduce the capacity utilization rate of NAND flash memory by 30% since October, and its partner Western Digital (WD) will also significantly reduce the proportion of 162-layer NAND flash memory, and will still focus on 112-layer products next year. .


Among the Korean manufacturers, SK Hynix has recently significantly revised its capital expenditure quota for 2023, and it is rumored that it has cut orders from equipment factories by more than 70%. Although Samsung disclosed that its operating profit in the third quarter will plummet by 30%, it has no plans to cut production capacity so far, and it seems that it will carry out counter-cyclical investment to the end.


At present, the industry chain, whether it is the terminal, the distribution channel or the original factory, is trying to destock, but the source of the memory supply is determined by the original factory. In terms of quantity, the original factory expanded production and braked hard to avoid creating more inventory; in terms of price, the original factory “exchanged price for quantity” regardless of cost, and strived to stimulate the willingness of downstream stocking. For downstream module factories and terminal manufacturers, the cost of stocking can be reduced, and the pressure is relieved.

Memory prices fall, downstream terminals and module factories benefit

For the module factory, the original memory factory will reduce the price and ship, which is conducive to the reduction of production costs, thereby promoting the growth of performance. At present, the industry expects that the DRAM market will bottom out earlier than NAND flash memory, while the revenue of memory module factories such as ADATA and Apacer has gradually increased in the third quarter. In contrast, the revenue of the upstream memory factory Nanya has been declining. In September, the revenue even fell by more than 50% year-on-year, and the decline will continue in the fourth quarter.


In the NAND flash memory market, the main control factory, Phison, said that all the original manufacturers are facing the pressure of loss, and the market price of NAND flash memory may have fallen below the manufacturing cost or even the cash cost, so the subsequent decline will gradually shrink, and the worst case of the market will be past. Accumulated to September this year, Phison’s PCIe SSD master shipments have increased by more than 26%, indicating that the original flash memory manufacturers have not reduced supply before.


In the context of high inventory in the entire industry chain, the original factory must come up with a lower supply price in order to stimulate the willingness to stock up in the downstream, and the price is to give up the growth of revenue and profit. According to past experience, the falling price of memory will also stimulate terminal manufacturers to increase the storage capacity of their products, but this year, the consumer market is basically in a pattern of “low peak season”. favorable.

Where does the market go in the future?

For the market outlook, the industry’s more pessimistic expectations show that the market has entered an “L-shaped” bottom posture, and the price decline will continue to the first half of 2023; more optimistic expectations indicate that after the inventory digestion in the second half of this year, it will be possible to reach the first half of 2023. Return to a healthy state.


For the above two expectations, the consensus is that this year will be within the inventory adjustment, and the expectations for the completion time of the inventory adjustment next year also reflect the judgments of all parties on the macro situation. However, with the development of electronic technology, the amount of memory used by various consumer products, automobiles and industrial equipment will continue to increase, and the long-term development of the storage industry can be viewed with full optimism.

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