‘Chicken Game’ Expected
An industry analyst is forecasting that a chicken game in the NAND Flash market will begin in earnest from 2019.
According to DRAMeXchange and industry sources on January 4, the production capacity expansion of major NAND Flash manufacturers, such as Samsung Electronics, SK Hynix, Toshiba, Intel, and Yangtze Memory Technologies Corporation (YMTC), a subsidiary of China’s Tsinghua Unigroup, will have increasing impacts on the industry, resulting in a possible oversupply in the NAND Flash market in 2019.
In this regard, Toshiba announced its Fab 7 construction plan to secure its competitiveness in 3D-NAND Flash with 96-layer or greater at the end of December last year right after Toshiba and Western Digital have reached an agreement to drop the suit. This plant will start operation from the second half of 2019.
YMTC will also mass produce the initial 32-layer 3D-NAND Flash products from second half of this year and prepare for mass production of 64-layer products soon after. Intel plans to complete the second-phase expansion of its fab in the Chinese city of Dalian and aims to double the facility’s 3D-NAND Flash capacity by the end of 2018. SK Hynix is also building a new factory, M15, in Cheongju, which also targets at production of 3D-NAND Flash with 96-layer or greater, just like Toshiba. M15 is expected to go into operation in early 2019.
DRAMeXchange said, “There can be an oversupply in the 3D-NAND Flash market from 2019 onward, so only some 2D-NAND Flash niche markets will remain.” DRAMeXchange predicts that NAND Flash suffered from a 2.3 percent of oversupply in 2015 but turned to a 2.1 percent undersupply in 2016 due to the surge in demand of server and mobile chips. The supply shortage will continue to this year.
The industry expects that there will be a tough competition in price after 2019 but the SSD market using NAND Flash memory chips will rapidly grow. According to market research firm IHS Markit, the price gap between solid-state drives (SSDs) and hard drives (HDDs) will decrease from 10 fold as of last year to three fold levels in 2021. Accordingly, the SSD market will continue to show a high average annual growth of 12.8 percent from 2016 to 2021 in terms of factory shipments. On the other hand, the growth rate of HDD market will stand at a mere 1.9 percent over the same period.
An official from the industry said, “The 2D-NAND Flash market has been already experiencing an oversupply but high value added 3D-NAND Flash chips for servers and mobile devices are still in short supply. The supply shortage of premium NAND Flash chips will continue for a while.”
Another official from the industry said, “NAND Flash is a growing industry so it will cause excessive competition when the size gets bigger than a certain point. However, PC manufacturers will introduce more SSDs when the price gets lower owing to the competition, which leads to higher demands. If it survives with the technical competitiveness, including fine processing, it can secure a stable profitability like DRAM.”