NAND Flash Prices Set to Stabilize and Rebound in Q4, Predicted to Remain Steady or Rise 0-5%

Samsung, one of the leading players in the tech industry, is making a bold move in response to a decline in demand. The company has announced a significant 50% reduction in production starting from September, with a particular focus on processes under 128 layers. This decision by Samsung is expected to have a domino effect, with other suppliers likely to follow suit and increase their production cutbacks in the fourth quarter in order to reduce inventory.

According to research conducted by TrendForce, this move is projected to have an impact on the prices of NAND Flash in the fourth quarter. The average prices are expected to either remain stable or experience a slight increase, possibly ranging from 0% to 5%. This aligns with TrendForce’s earlier forecasts, which predicted a rally in NAND Flash prices ahead of DRAM.

The reason behind this production cut is the mounting losses faced by NAND Flash vendors and the fact that sales prices are approaching production costs. By reducing production, suppliers hope to stabilize and potentially increase prices. It’s worth noting that NAND Flash Wafer contract prices have already started to recover in August. With further production cutbacks, there is optimism surrounding the resurgence of customer stockpiling, which will further impact price dynamics in September.

However, for this positive trend to continue into 2024, sustained production cutbacks and a strong rebound in enterprise SSD purchase orders are crucial. These factors will determine whether the current upward trajectory of prices can be maintained.

There is a silver lining for suppliers in this situation. The anticipated deficit is expected to shrink, and module makers are likely to benefit from this. While NAND Flash has more flexibility in pricing compared to DRAM, the lack of significant demand growth in 2023 has been a challenge for the market. The dominance of AI servers, particularly over general-purpose servers, has contributed to a less-than-stellar forecast for the NAND Flash market this year. As a result, there has been a decline in average prices in the third quarter, and suppliers are struggling with widening deficits.

TrendForce specifically focuses on Samsung’s inventory levels and highlights the importance of stringent production control. While it may be wishful thinking to expect end-users to increase stockpiling and reduce inventory by the end of the year, the real game-changer lies in controlling production. Samsung’s aggressive production cuts are expected to have a ripple effect, potentially leading to an increase in prices for their primary products. This ripple effect is anticipated to gradually narrow the deficit gap for suppliers and improve the profit outlook for module makers.