China's Memory Module Sell-Off Drives SSD Prices Down

In the second quarter of 2024, China's memory module manufacturers, responding to ongoing weak consumer demand and increased regulatory scrutiny, accelerated inventory reduction efforts after clearing surplus stock. This has led to a significant wave of product sell-offs, causing a drop in spot prices for solid-state drives (SSDs).

Despite elevated NAND wafer prices, the retail prices in the spot market have reverted to early 2023 levels. Industry experts anticipate that market volatility in China will persist until year-end, with potential temporary shortages for certain specialized products.

Over the past two years, China has actively promoted domestic supply chain development, enabling local memory module manufacturers to secure government contracts and domestic brand orders, driving rapid business growth and the emergence of many new startups seeking financing. However, in 2024, many suppliers faced tax audits, sparking signs of panic and anxiety within the Chinese memory market. In April, the General Administration of Customs initiated a crackdown on smuggling activities, focusing on fraudulent practices such as VAT invoice manipulation and subsidy fraud, which have significantly impacted several domestic memory firms.

As manufacturers prepare for anticipated market cooling in the second quarter, they have sold off a considerable amount of low-cost inventory. Initially, a recovery was expected in the second half of 2024, but this has not materialized, compounded by continued weak demand in September, leading some companies to liquidate their final reserves.

In addition to sluggish domestic demand, overseas markets in Europe, Southeast Asia, and South America are also experiencing disappointing demand. Chinese industry insiders noted they had prepared for a seasonal downturn, but the extent of the decline was unforeseen, with performance averaging around half of 2023's figures.

According to recent data from market research firm Omdia, the price of the most sold 256Gb triple-level cell (TLC) NAND flash products is expected to decrease by 2.6% from $1.54 in the previous quarter to $1.50 in Q3. This trend reflects broader market dynamics, indicating that demand in major sectors such as smartphones and PCs has not rebounded, affecting price recovery.

However, the market is not experiencing uniform decline. Omdia forecasts that the price of 256Gb quad-level cell (QLC) NAND used in enterprise SSDs will rise from $1.23 in Q2 to $1.36 in Q4. This divergence, with consumer-oriented product prices falling while server-oriented product prices increase, is a noteworthy trend. Omdia has also revised its prediction for AI PC penetration in the market down to below 10%, attributing part of this change to Intel's restructuring impacts.