DRAM/NAND Prices Short Term Affected by Japan-South Korea Trade Tension and Toshiba Outage; Long Term Effects Depend on Inventory Levels, Says TrendForce
DRAMeXchange, a division of TrendForce, points out that after the Toshiba outage in mid-June, the Japanese government announced that it will be controlling South Korea-bound exports of three key materials used in the manufacturing of semiconductors, smartphones and panels, causing module manufacturers in the memory industry downstream to give higher quotes. However, since DRAM and NAND Flash inventories remain high, and that this is not a complete barring of materials but a prolonging of procedures, the possibility of a short-term, structural reversal of supply and demand is low.
The Japan-South Korea trade tensions raised news about a reversal in memory prices within the industry. TrendForce's analyses gives that the inventories of module manufacturers downstream are generally lower since DRAM prices have already been sliding fast for three consecutive quarters, and we therefore do see some module manufacturers raising their quotes or announcing halts to production in light of the material restrictions to signal a rebound. However, spot markets currently make up just less than 10% of the entire DRAM market; the supply-demand trend in the mid- and long-term remains dependent on contract markets, which make up over 90%.
Looking at demand, we see that whether PCs and smartphones at the retail end or the implementation of enterprise servers and datacenters, overall end demand still seems to be rather weak. Yet looking back at supply, we see DRAM suppliers generally sitting at over 3 months' worth of inventories, leading to a continual sliding of contract prices for PC, server and mobile DRAMs at the beginning of 3Q with no signs of reversal as of yet. TrendForce thinks the possibility of a structural reversal of supply and demand in the DRAM market to be slim.
The NAND flash market, on the other hand, is affected by Japan's increasingly stringent controls on materials exports and the Toshiba outage. Since wafer quotes are already a bit low, July is forecast to see rising quotes beginning from July. But considering the fact that suppliers generally have two to three months' worth of inventories in their possession, most module manufacturers won't be raising prices immediately from the get-go. Whether transaction prices will rise in the future still depends on the market and inventories on the supply side. As for quotes by OEMs for various SSD and eMMC/UFS products, although some suppliers have temporarily ceased shipments, TrendForce, judging from supply and demand and taking the inventories of OEMs into consideration, thinks that prices will come under downward pressure in the long term despite the short term increase in NAND flash prices.
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