Fall in Prices Offset Bit Shipment Growth, with 2Q19 Revenues of NAND Flash Brands Trending Flat from 1Q19, Says TrendForce
The overview given by DRAMeXchange, a division of TrendForce, on the performance of the NAND flash market for 2Q19 finds that end demand in smartphone, notebook PC and server markets have recovered from the traditional offseason 1Q19, bringing total bit consumption growth to 15%. But since suppliers still have rather large levels of inventory on their hands, the drop in contract prices for 2Q19 have remained quite significant. Total business revenue remained around the US$10.8 billion mark, trending flat from 1Q19.
Although peak season demand is expected to push up shipments in 3Q19 looking forward, demand will probably be weaker than previous years due to the geo-economical conflicts. NAND flash supply, however, was hit hard by the Toshiba outage in June, causing the decline in contract prices to shrink in 3Q19. The wafer market, on the other hand, exhibited a growth trend, and total revenue is predicted to stand a better chance of growing over 2Q19.
Samsung's sales bit performance grew by 30% in 2Q19 due to the recovery in server demand, the notable increase in adoption of high capacity products in various applications, and the transferal of orders for mobile devices. As demand begins to lighten up, the QoQ drop in ASP has shrunk to 15%, putting 2Q19 revenue at US$3.766 billion and registering a growth of 16.6% QoQ over 1Q19.
Analyzing production capacity, we see Samsung sticking to its current capacity plan for this year. As the company makes the transition to V-NAND to meet the demand of its clients, it will be focusing on scaling back its 2D NAND production at Line 12. The space freed up will be used for R&D. As for 3D NAND, the overall scale of wafer starts is expected to be on a par with that in 1Q19 as long as no intentional or artificial reductions to capacity are made.
SK Hynix's operational performance remains closely tied to the sales performance of its mobile devices. The rapid increase in the average content per box led by price elasticity and the transferal of orders from some Chinese customers caused bit shipments to surge by 40% QoQ in 2Q19. But since ASP still dropped by a significant 25%, SK Hynix's NAND flash revenue came to US$1.106 billion, giving an 8.1% QoQ growth.
Concerning capacity plans, SK Hynix announced a 15% reduction YoY in overall NAND wafer starts. This was mainly due to plans to reduce 2D NAND process production to make the transition into less-costly 3D NAND production. Capacity expansions for the new M15 plant will still carry on as scheduled while 3D NAND wafer starts will continue to increase slowly but steadily, with the majority using TLC architecture. SK Hynix still has no plans to mass produce QLC products this year.
Toshiba's shipments regained momentum in 2Q19 thanks to more proactive inventory stocking on the side of suppliers, putting bit shipment growths at 0-5% QoQ. But the further decline in contract prices 2Q19 caused ASP to fall by nearly 15% QoQ and its revenue to drop by 10.6% QoQ, coming to US$1.948 billion.
Regarding production capacity, the plant at Yokkaichi was significantly impacted by the outage, and although production lines have already resumed normal operation before mid-July, it still caused a major impact on overall market supply and will cause global annual production to drop by 3% compared to the amount originally forecast for this year.
Since WDC made the decision to cut production in 1H19, its bit shipment growth in 2Q was originally forecast to be lower than other suppliers. Furthermore, WDC was prohibited from selling products to Huawei by the US ban. Despite receiving approval to resume shipments to Huawei after discussion with the Commerce Department, shipments have already been discontinued for a month. Along with Huawei's move to switch suppliers for their orders, this caused bit shipments to decline by 1%, but the decline in production also narrowed the decline in ASP effectively down to 6%, with total revenue hitting US$1.506 billion, a 6.5% decline QoQ.
Judging from production capacity, WDC lost around 6 exabytes of capacity due to the Yokkaichi outage, and production lines have mostly resumed operation by the end of July. Furthermore, WDC has already reached a consensus with Toshiba to joint invest in the K1 fab in Iwate , which will secure for them considerable, additional capacity in the future.
Impacted by the further decline in 2Q19 and Huawei event, Micron's bit shipments declined by around 5%, with ASP falling by around 15% QoQ. NAND flash revenue came to US$1.461 billion, a 17.7% decline over 1Q19.
For production capacity, Micron announced a 5% cut to its original capacity in 1Q19, which later rose to 10% in 2Q19. 3D NAND capacity will still make up at least 90% of total production.
Intel postponed plans to expand production at the Dalian plant due to the poor fiscal performance it gave in 1Q19. 64L products still make up the majority of current shipments. Besides pushing its clients to adopt 96L products, it will also proactively introduce them to high capacity products, with SSD product sales bit performance notably reflecting price elasticity. For 2Q19, sales bit performance grew by over 20%, ASP slid by nearly 15%, and revenue came to US$940 million, a 2.7% growth over 1Q19.
As for production capacity and processes, Intel's Dalian plant will stick to its 1Q plan to discontinue capacity expansions until the end of this year, and gradually move towards 96L products in pace with customers' adoption of the technology.
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