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NAND flash price negotiation continues

Posted: 07 Jul 2011 ?? ?Print Version ?Bookmark and Share

Keywords:NAND Flash? market contract price?

As of June 30, 2011, suppliers and memory card customers are still unable to resolve the contract price of NAND flash chips, DRAMeXchange reported.

Despite numerous negotiations, suppliers and buyers are still unable to reach a decision because of the discrepancies of NAND flash contract price and market views from both parties.

By the end of June, some customers were directly buying white-box memory cards in place of the chips. Because of this, DRAMeXchange will hold off with its update of the latest contract price and wait until the negotiations have been finalized. Buyers and suppliers are expected to reach an agreement by mid-July.

Since early June, the NAND flash market has been affected by market variables that resulted in the delay in price negotiations between buyers and suppliers. One of the variables that attracted much attention from the market is the increase in inventory levels of memory card customers in 1H2Q. This was due to raw materials shortage concerns after the March 11 Japan quake. However, in 2H2Q the market demand fell short of expectations, so the high inventory level was lowered before the end of the quarter. As a result, before the end of June, there was low interest in purchasing larger volumes. The customers directly purchased white-box memory cards but did not rush to purchase the chips. Because of the Fujiwhara effect in June approaching the end of Q2 and the usual off-season, memory card customers were unwilling to purchase chips until the suppliers significantly lower their prices. To maintain profitability, suppliers were also unwilling to reduce prices.

Since early June, the market was worried that Europe, the U.S. and Japan may be disrupted by uncertain macro-factors. The demand for NAND flash was lowered as was the expectation for the market in 2Q11 and 3Q11. Sales of non-Apple tablet computers were also not as good as expected, which further reduced the OEM demand for the system products. Without a clear time frame on re-stocking and getting purchasing orders in later months, the downstream customers adopted passive strategy by waiting until July.

Key NAND flash suppliers will also speed up output of new 2xnm process technologies, and manufacturing plants of NAND flash makers will start mass production in 3Q11. Thus, the market supply will also increase accordingly. The oversupply of NAND flash in 2Q11 will continue until 3Q11.

DRAMeXchange thinks that international organizations and major countries are cooperating and negotiating to address the stagnant economic and political problems domestically and in other regions. The company also believe that appropriate price correction of raw materials can also help reduce inflation pressure in many countries. Therefore, it is expected that in 2H11, the global economy will slowly recover and the traditional re-stocking in peak season may drive year-end peak demand in 4Q11 through the launch of new products and new models in late 3Q11.

According to DRAMeXchange, should the end-application market recover by 3Q11, some NAND flash makers will consider slowing down new capacity expansion progress in 2H11. As a result, by comprehensive consideration of the above market variables, DRAMeXchange expects the re-stocking demand of NAND flash may gradually recover from August, and price downtrend may steadily stop and stabilize in later July. However, the following pricing trend of NAND flash market will still depend on the strength of the peak season demand in 2H3Q.

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