DRAMeXchange> Weekly Research> TrendForce: NAND Flash Demand Not as Expected, Arrival of Peak Season Delay...
        
 

【Market View】TrendForce: NAND Flash Demand Not as Expected, Arrival of Peak Season Delayed


Published May.22 2012,16:28 PM (GMT+8)

TrendForce: NAND Flash Demand Not as Expected, Arrival of Peak Season Delayed

According to DRAMeXchange, a research division of TrendForce, although some new smartphone, tablet PC, and ultrabook models will be hitting the market in May and June, due to macroeconomic uncertainties and the weak 2Q sales resulting from the off-peak season, 2Q demand will see a mere 5-10% increase over the previous quarter. As for the retail channel memory card and universal flash drive markets, impact from cloud storage services such as Google Drive, Dropbox, Evernote, etc. will cause 2Q shipment volume to fall by approximately 5% compared to the first quarter.

Affected by weak demand, in 1HMay mainstream NAND flash contract price fell by 8-14% compared to 2HApr. Therefore, many NAND flash suppliers hold conservative market outlooks for 1H12 and 3Q12, and TrendForce believes the oversupply situation will continue in 1H12. Furthermore, due to the delayed release of certain new smartphone, tablet PC, and ultrabook models, the industry will not see significant demand increase until mid-3Q and early 4Q. Therefore, 2Q NAND flash demand bit growth will increase by 9.3% compared to the first quarter, and the total demand bit growth forecast for 2012 is adjusted downwards slightly to 73.1%.

TrendForce provides the following analysis of supply and demand factors affecting the NAND flash market in 2Q and 3Q:

1. The European debt crisis and the release schedule for new platforms will continue to affect NAND flash demand in 2Q and 3Q:
According to TrendForce supply channel research, in the past two months suppliers’ outlook on the European market has turned conservative due to the European debt crisis. As some manufacturers are seeing product yield rate issues due to a switch in component supply as well as the adoption of new processors, large-scale shipments of certain new smartphone, tablet PC, and ultrabook models loaded with new platforms have been delayed. Taking into consideration traditional 3Q demand and manufacturers’ inventory stocking schedules, TrendForce believes 3Q NAND flash demand will not pick up noticeably until after mid-3Q.

2. NAND flash chip suppliers’ 1H12 and 3Q outlook turns conservative:
As NAND flash contract price continues on a downslide, NAND flash makers’ 1Q earnings reports reveal that even though producing NAND flash remains more profitable than manufacturing DRAM, 1Q NAND flash profit margins were significantly lower than the previous quarter. Many suppliers are conservative towards the 1H12 NAND flash market and capacity expansion plans. TrendForce expects 1H12 bit output will come mostly from technology migration, to slow the impact of oversupply on price and profit. As yield rate for the 20nm process is taking longer to improve than manufacturers expected, cost structure improvements due to technology migration will not be significant in 1H12, and manufacturers are limiting the production ratio for the new process in 1H12. In consideration of the aforementioned factors, major NAND flash vendors will carefully adjust capex and bit output growth targets, while continuing to increase the revenue ratio of system applications such as eMMC and SSD to make up for weak memory card and universal flash drive demand.

In summary, macroeconomic instability will continue to affect NAND flash suppliers and market demand in 2Q and 3Q. Although April and May mainstream NAND flash contract price declined due to traditional off-peak season effects, TrendForce believes vendors’ conservative outlooks will help stabilize the NAND flash market, reducing profit decline caused by oversupply. As the delayed release of system products will cause the 2012 peak season to be postponed until mid-3Q, TrendForce has adjusted this year’s NAND flash bit output growth and demand bit growth forecast to 70.9% and 73.1%, respectively. Additionally, as there is an increasing number uncertainties affecting the NAND flash market, TrendForce expects mainstream NAND flash contract price will stay on a downtrend in May and June, and may stabilize after July depending on the state of global economic recovery and the sales status of new NAND flash application products in 2H12.