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1hAug NAND prices stabilize due to restraints, says report

Posted: 22 Aug 2012 ?? ?Print Version ?Bookmark and Share

Keywords:NAND Flash? universal flash drives? PC market? ultrabook? Windows 8?

According to a recent report from TrendForce's DRAMeXchange, 1H August NAND contract prices have continued to stabilize, while average contract prices have either remained flat or showed minute increases. Meanwhile, vendors of memory cards and universal flash drives (UFDs) have displayed a conservative attitude toward market prospects as buyers and sellers have remained divided over future pricing trends. As a result, NAND Flash manufacturers have implemented their strategies of restraining supply.

With regard to NAND Flash pricing and market outlook, the supply side shows that major NAND Flash manufacturers like Samsung and Toshiba are continuing to impose tighter supply strategies toward memory card and UFD vendors. Looking at various NAND Flash vendors' 2Q12 financial reports, it is revealed that both the revenue and profit margin figures are tighter than those exhibited in the previous quarter. As such, NAND Flash vendors have adopted stricter price standards to prevent profits from slipping, whereas for the less profitable memory card and UFD markets, tighter production control is being imposed in order to amend the supply-demand imbalance.

From the buyer's perspective, given that memory card and UFD product performance has yet to peak in 3Q12, and taking into account the conservative outlook for 4Q12, stock levels have been regulated more cautiously, which in turn weakened the incentive to purchase further inventory.

Apart from Toshiba, which recently undertook a 30 percent production cut, other manufacturers have yet to announce their production plans. However, as�product shipments have fallen below expectations, the annual shipment growth rate has been adjusted downwards to 60-65%. This, in a sense, shows how NAND Flash vendors remain reserved about demand prospects for next year's peak season.

Figure 1: 32Gb MLC NAND Flash Contract Price
Source: DRAMeXchange, Aug. 2012

From the demand side, although Windows 8 is confirmed for an October release, under the influence of the weakening economy, along with the crowding-out effect brought by the release of numerous tablet PCs and smartphones, the PC market will not adhere to traditional seasonality patterns. The fact that ultrabook shipment numbers have fallen below expectation is also contributing to the PC industry's negative annual growth rate.

In the smartphone market, manufacturers are also faced with the prospect of making downward shipping adjustments. With the exception of Samsung and Apple, both of which have stable market shares, many brands must significantly lower their shipment quantities. Aside from the weakening performance of memory cards and UFDs, the lower than expected shipments of system products are also driving NAND Flash vendors to impose extra measures to combat plummeting prices.

On the whole, it seems that demand is likely to remain conservative in 2H12. However, TrendForce reported that with NAND Flash vendors continuing with their supply control strategies, and with the release of new products in 3Q12 expected to stimulate inventory replenishment, NAND Flash contract prices will likely remain stable in the short term. Given low visibility of end product orders, 4Q12 price movements will depend on the state of future demand.

Figure 1: 64Gb MLC NAND Flash Contract Price
Source: DRAMeXchange Aug 2012

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