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NAND spot prices up, oversupply persists

Posted: 15 Apr 2008 ?? ?Print Version ?Bookmark and Share

Keywords:NAND prices? NAND oversupply? flash memory market?

We have good news and bad news for NAND flash suppliers. Good news: Prices have increased in recent days. Bad news: Don't look for a NAND upturn.

The overall market looks bleak. The U.S. subprime mortgage crisis has impacted the consumer electronics markets. Against the backdrop of softening demand, iSuppli Corp. has recently cut its growth forecast for NAND flash devices by two thirds.

But prices for NAND are showing signs of life. "MLC (multilevel cell) NAND prices have been moving up as well as with spot pricing for 8-Gbit MLC strengthening about 8 percent over the past couple days alone. 8Gbit SLC (single-level cell) has stayed pretty stable," said Avi Cohen, an analyst with Avian Securities LLC.

"The move in the spot prices for MLC NAND is likely due to replenishment of very low inventories kept by dealers as pricing was falling and typical seasonal buying in anticipation of Dads and Grads," he said in a report. "In contrast, speaking with our sources we were told that in the OEM market NAND flash pricing has not yet seen a similar move up and that the market continues to be somewhat weak and oversupplied."

NAND optimism
Others see a similar pattern. "While a weaker Q1 is largely expected due to poor pricing, we believe investors are more optimistic for Q2 given the recent rebound of NAND spot prices," said Edwin Mok, an analyst with Needham & Co. LLC. "However, we believe the NAND market remains oversupplied and end demand is only seasonal this quarter."

The optimism for NAND is expected to be short-lived. "We think the 10-15 percent price increase since the beginning of April is a result of pricing control by key chip makers, which is likely to be short-lived," he said in a report. "We believe demand remains seasonally weak and inventory levels at chip makers remain relatively higher. Therefore, even with the recent rebound, we believe ASP is likely to decline another 10-20 percent sequentially in Q2."

SanDisk numbers
As a result, the analyst has lowered his estimates for SanDisk Corp. "Following the recent run-up in SanDisk's share price on the rebound of NAND spot prices, we believe investors will shift their focus to Q2 08 guidance," he said. "Based on our view that demand remains benign, we expect SanDisk to provide conservative Q2 revenue guidance and reduce its full year revenue guidance."

SanDisk's guidance called for full-year sales to go up 15-to-25 percent. Needham is modeling Q2 revenue and EPS of $875 million and 27 cents, respectively, verses consensus of $904 million and 29 cents.

A downturn in the NAND flash market is forcing many vendors to cut production or delay their fabs.

Micron Technology Inc. has recently pushed out the production of a proposed fab in Singapore, while rival Hynix Semiconductor Inc. plans to cut NAND production. Market leaders Samsung Electronics Co. Ltd and Toshiba Corp. are reportedly not cutting NAND production, according to reports.

- Mark LaPedus
EE Times

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