NAND Supply/Demand and Prices Still Hot Topic in Asia – Trendfocus

This article is an Executive Brief published by Trendfocus, Inc. on September 26.

Part 2 of Other Observations from Asia This Past Week

NAND supply/demand and prices are still a hot topic in Asia.

Having met several of the key NAND suppliers through this Asia swing, we were able to get some more insight, but not necessarily clarity, on this situation. Opinions differ between suppliers in which there are some that think the current demand is artificially distorted by customers’ double ordering (as evidenced by outsized SSD inventory at a number of PC OEMs).

One camp believes NAND supply is slowly improving, and the imbalance will improve through the back half of 2017 leading to lower prices.

The other camp is still bound by the opinion that supply will remain tight through all of this year and well into 2018, in which case, prices will be flat at best or could continue to tick upward. Of course, NAND buyers are beating the drum that there will be massive oversupply in 2018 and prices will crash. Take your pick …

The long term NAND bit growth outlook is relatively on par with our projections of +30% CAGR through 2021; with 2017 and 2018 growth rates well within our forecast of +31% and +40%, respectively.

Boosting NAND bit density has become more challenging than it was five plus years ago when the CAGR was bit output grew around 50% per year, and future density growth and bit output will most likely slow over the next five years and beyond. As a result, the ROI for each technology transition is lengthening, and is one of the key factors behind the NAND suppliers’ expected pricing strategy. The 20%+ per year price declines of 2-3 years ago are mostly likely a phenomenon of the past, and the more realistic price takedown targets in the future are probably more in the 10% per year range.

SSD prices peaking? The third calendar quarter saw the most unique pricing behavior that we have seen in years – there was no consistency as multiple vendors went in different directions, with some remaining flat, sequentially. What we derive from this noise is that SSD prices may have hit the high point in this cycle for both client and enterprise devices. Some vendors will even plan to give some relief in 4Q17 – very, very small relief. Starting in 2018, we will see more SSD vendors possibly offering healthier takedowns on a Q/Q basis under the assumption that NAND supply and demand re-balance.

M.2 PCIe (client) will continue to see healthy growth, also helped by current NBPC designs that are finally ready to ramp with PCIe, continuing the transition that began in earnest in 2CQ17. Lucrative enterprise SSD shipments will also increase measurably, especially with PCIe models towards the end of the year. We should see another healthy uptick in both unit volumes and overall capacity mix when it comes to both M.2 and U.2 PCIe solutions; however, SAS will still maintain the highest average capacity of all enterprise SSDs.