NAND Industry to Benefit Greatly

The author is an analyst of NH Investment & Securities. He can be reached at hwdoh@nhqv.com. -- Ed.

 

Production of parts related to Sony’s PS5 starts this week. We expect the PS5 to contribute to semiconductor industry earnings improvement in 2H20. Within the memory industry, NAND demand improvement is to outpace that for DRAM. In 2020, the PS5 is anticipated to push up NAND demand by 5%.

Production of PS5-related parts starts this week

Out of respect for the George Floyd protests in the US, Sony’s online PS5 launch event (originally scheduled for Jun 4) has been postponed. Despite delays, the production plans of parts makers for the PS5 remain intact. According to Taiwanese media sources, back-end suppliers are to begin parts production this week. We expect production to peak in 3Q20.

We note that AMD has been selected as the manufacturer for the PS5’s SoCs. The CPU is based on the 8-core Ryzen Zen 2 architecture, and the GPU is built on the Radeon RDNA 2 architecture and supports real-time ray-tracing acceleration. The console is to feature 16 GB of GDDR6 system memory and 825 GB of SSD storage.

NAND industry to benefit greatly

Manufacturers of components (such as PCBs) and IC substrates are predicting that the PS5 will serve as an important growth driver in 2H20. In particular, the PS5 should contribute significantly to 2H20 earnings at AMD (the SoC manufacturer), who saw sluggish semi-custom chip earnings in 1H20 on a lull in demand ahead of the PS5 release. Backed by the PS5 launch, AMD’s semi-custom chip earnings should improve in 2H20.

In the memory industry, NAND demand improvement is likely to outpace that for DRAM, given that the PS5 is to be the first console in the series to be equipped with an SSD instead of an HDD. Assuming 825 GB of SSD per unit and sales of 20mn units pa, global NAND demand should increase by 5% pa.

If NAND industry conditions continue improving in 2H20, SK Hynix (whose NAND business is currently in the red) should benefit the most among NAND players. In 2019, losses at SK Hynix’s NAND division reached W2tn. Having started mass-production of 96-layer 3D NAND in 2H19, SK Hynix plans to begin mass production of the 128-layer process in 2H20.

 

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