Anticipating 50% Surge in NAND Chip Prices

Following a recent recovery from the downturn in NAND chip prices, prevailing quotes exhibit a noticeable variance in comparison to major suppliers, including Samsung, Kioxia, SK Hynix, and Micron.

The current trajectory of NAND chip prices indicates an upward trend, signaling the commencement of a pricing surge. Anticipated in the short term, the forthcoming surge could potentially reach up to 50%, suggesting a period of substantial price volatility.

An examination of global NAND Flash market standings, as per a report by research firm Omdia, reveals Samsung's dominance with a 34.3% market share. Close behind is Japanese entity Kioxia, holding a market share of 19.5%, followed by U.S.-based Western Digital at third place with a market share of 15.9%, and SK Hynix at fourth place with a market share of approximately 15.1%.

Industry experts note that major international manufacturers are actively curtailing NAND chip production due to lower profit margins compared to DRAM. For instance, Samsung has expanded its reduction of NAND chip production to 50% of total capacity since September, focusing on products with stacking levels below 128 layers. The objective is to expedite inventory reduction, stabilize prices, and potentially implement gradual quarterly price increases of 20% until mid-2024.

TrendForce, another research firm, reports that following Samsung's 50% reduction in production, other suppliers are also adopting a cautious wafer allocation strategy. After more than six months of production reduction in certain processes and capacities, a structural supply shortage is evident, providing chip manufacturers with a dominant position in controlling prices. Observations for the fourth quarter indicate scarce availability of low-priced inventory, yet buyers are inclined to maintain high stock levels and continue procurement.

Insiders in the industry reveal that despite a significant increase in contract prices following the deep plunge in NAND chip prices, chip manufacturers are still a considerable distance away from reaching profitability. It is anticipated that prices need to rise by another 40% to surpass the breakeven point for suppliers. Consequently, the next few quarters are expected to witness a robust and upward trajectory in prices.