According to Taiwan's Electronic Times, the market has recently reported that Micron and YMTC have raised prices due to tight supply.
Supply side: power outages, production cuts, tight inventories, and rising prices
The supply crunch is mainly caused by a combination of factors. Let's start with Micron, which suffered a power outage at its NAND production facility in Singapore, one of Micron's main NAND production facilities, in January. The power outage of just a few hours has had a serious impact on production capacity, which directly leads to a shortage of supply. By the beginning of March, Micron had sent out price increase notices to customers, and the price of new orders increased by an average of 11%. Pan Jiancheng, CEO of Phison Technology, revealed that even though they placed an order with Micron as early as the end of 2024, they have recently encountered the problem of insufficient delivery, which shows how tight Micron's supply is.
Not only Micron, but also Samsung and SK hynix's production cuts are also continuing to ferment. As early as the fourth quarter of 2024, in the face of a long-term oversupply in the market, major memory manufacturers such as Samsung, SK hynix, Micron, and Kioxia began to reduce production. Samsung announced a 10%-15% cut in NAND capacity, while SK hynix plans to cut production by 10% in the first half of 2024. Now, the effects of the production cuts are finally being felt, and in Q1 2024, Samsung and SK hynix's NAND production will be reduced by more than 10% compared to the second half of last year. Some industry insiders even complained that Samsung's delivery volume in March was only 20%-25% of the original order, although on the surface it was a lack of production capacity, but the intention to increase prices was already obvious. According to the current trend, the NAND prices of Samsung and SK hynix are expected to increase by 10% or more from April.
Although YMTC has not clearly announced the specific capacity and supply situation, market news has already come out that its retail brand Zhitai will increase channel prices from April, which is expected to increase by more than 10%. The person in charge of a domestic storage module manufacturer said that the prices of all NAND manufacturers are currently rising, and YMTC is no exception. After all, in the domestic market, YMTC is the only manufacturer with 3D NAND mass production capabilities, but its production capacity is relatively limited, and in the case of overall tight supply, price increases become logical.
Figure: NAND flash memory price hike is coming?
On the demand side: With the rise of AI, memory chips usher in new opportunities
Although the global economic downturn has led to a continued downturn in the traditional consumer electronics market such as PCs and mobile phones, the demand for NAND flash memory is quietly changing. Over the past few years, there has been an oversupply of NAND, with demand growth falling from 30% to 10%-15% per year. But the rapid development of AI technology is becoming a new growth engine.
Since the explosion of AI applications such as ChatGPT and AIGC, the demand for computing power and storage has increased exponentially. The agency predicts that the global demand for enterprise SSDs will grow by at least 30% by 2025. AI is now like a "hungry beast" that continues to devour memory chips and inject new impetus into the NAND market.
In addition to AI, policies such as state subsidies are also driving demand for small-capacity NAND in consumer electronics such as TVs and wearables. For example, in the domestic market, small-capacity NAND was one of the first categories to rebound in this wave of price increases. Memory chip manufacturers have begun to lean towards large-capacity NAND production, and the manufacturing task of products such as small-capacity eMMC has been handed over to module manufacturers. Due to the increase in the price of original wafers, the production costs of module manufacturers have also increased. Taking 32GB eMMC as an example, the price will increase by 3.8% month-on-month in Q1 2025.
Major manufacturers follow the trend and raise prices, and the NAND market has been decided?
In the face of this round of tight supply and recovering demand, other manufacturers have also followed up with price increases. For example, SanDisk announced as early as March 6 that it would increase the price of omnichannel storage products by more than 10% starting April 1, and also planned to implement quarterly dynamic price adjustments. The official reasons given are the imbalance between supply and demand and international tariff pressures.
The wave of price increases across the NAND market has intensified, but whether this price rally can be sustained depends on the acceptance of the end market. If NAND prices rise too quickly, it could make consumers more cautious and further dampen demand. In addition, AI terminal products, such as AI PCS, AI glasses, AI headsets, etc., are still in their infancy, and it is still doubtful whether they can trigger a large-scale replacement wave.
Conclusion: The wave of price increases is both a challenge and an opportunity
Micron and YMTC have taken the lead in price increases, which is just a microcosm of the changes in the NAND market. The supply-side production reduction and the growth of the demand-side AI field have caused NAND prices to rebound, but the final market direction still depends on the acceptance of the end market and whether the demand for AI can continue to be released.
