Flash memory prices fall, NAND flash memory will enter the adjustment period

A few days ago, the Nikkei News reported that as Apple adjusts its production of the iPhone X and Chinese smartphone manufacturers experience a slowdown in sales, some memory prices have begun to decline. Specifically, NAND flash memory is entering a period of adjustment. According to the report, this shift is driven by Apple's production changes and weaker demand from Chinese brands, which has led to a drop in prices for certain types of memory. Previously, the demand for memory-centric semiconductors had been growing steadily, keeping market conditions strong. Companies across the semiconductor industry were closely monitoring whether the market was entering a correction phase. The impact of these changes is being felt across the supply chain, from raw materials to manufacturing equipment. In terms of NAND flash memory used in smartphones, spot prices have dropped by approximately 10% over the past three months, marking a shift from the continuous price increases seen since late 2016. This change signals a potential turning point in the market. According to Luan Heng, a columnist for SeekingAlpha, data from Korea Investment & Securities shows that average selling prices (ASPs) for NAND and DRAM have been declining in recent quarters. Samsung and SK Hynix, two major players, have also experienced downward trends in their average selling prices. Nikkei highlighted that since 2016, when iPhones began incorporating flash memory capable of storing dozens of high-definition movies, global smartphone storage capacity has increased significantly. Additionally, the demand for IT companies to store personal data in data centers has expanded. As a result, the flash memory market is expected to grow rapidly in the medium to long term. However, Apple’s iPhone X saw a 50% drop in output between January and March. Analyst Sean Yang from CINNO Research noted that Apple is the largest consumer of these chips, accounting for about 1.6% of global demand in 2017—roughly 160 million gigabytes. A reduction in iPhone X production means fewer consumers of memory chips, which could slow down the growth of NAND, DRAM, and their average selling prices. Meanwhile, fast-growing Chinese smartphone brands like OPPO and vivo are also facing challenges. IDC data shows that global smartphone sales fell by 0.1% year-on-year in 2017. These market shifts have directly impacted the supply and demand for flash memory. Samsung had initially planned to build a new NAND flash memory production line at its Pyeongtaek factory. However, with the price decline, it now plans to focus on building a DRAM production line instead. According to JPMorgan Securities, Samsung's investment in flash memory is expected to decrease by 30% year-on-year in 2018. DRAMexchange predicts that DRAM supply will grow by 22.5% in 2018, up from 19.5% in 2017. However, DRAM revenue is expected to grow by only 30%, far below the 76% growth seen in 2017. The development of memory factories in mainland China is also affecting the market. While some projects are expected to start operating as early as 2019, progress is accelerating. For example, Jinhua IC in Fujian is on track to complete its major factory construction by October this year. Yangtze River Storage Technologies in Wuhan plans to build three large-scale 3D NAND flash memory plants, with the first expected to begin production in 2018. Meanwhile, Hefei-based companies have also started investing in DRAM production equipment. Robert Castellano believes that the decline in memory prices, combined with China’s efforts to establish domestic memory production, suggests that the “super cycle” of memory chips may be coming to an end. According to a source from JPMorgan Securities cited by Nikkei, NAND flash memory is entering a period of adjustment. Moriyama notes that with improved yields from various manufacturers, the supply of NAND flash memory will increase, easing the supply shortage compared to 2017. DIGITIMES points out that while the semiconductor industry still expects global demand for storage equipment to grow, the NAND memory market is currently undergoing a short-term adjustment. In the medium to long term, it is expected to rebound. However, the market has become increasingly volatile, and if it overlaps with weak market sentiment, performance in 2018 may not be optimistic.

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