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Chinese module manufacturers continue to maintain high inventory requirements to expand cooperation with smartphone brands.
TrendForce expects NAND Flash contract prices to rise sharply by 13%-18% in Q2, with enterprise SSDs seeing the highest increases. Although Kioxia and Western Digital have increased capacity utilization since the first quarter of this year, other suppliers have remained conservative in their production strategies. NAND flash purchases were slightly lower in Q2 compared to Q1, but this did not impact the momentum of the overall market, which continues to be impacted by supplier inventory reductions and production cuts.
The demand for eMMC is mainly driven by Chinese smartphone brands, which has led to a significant increase in shipments from Chinese module manufacturers as some suppliers have reduced supply. Buyers are increasingly adopting module manufacturers' solutions to meet production needs, thereby enhancing the technological advancements of China's module factories and their impact on quality customers. This trend is likely to increase the penetration of eMMC products among smartphone customers, with eMMC contract prices expected to rise by 10%-15% in the second quarter due to a sharp rebound in NAND Flash wafer prices.
The UFS market was buoyed by strong demand for smartphones in India and Southeast Asia, which supported strong order momentum for UFS in the second quarter. Chinese smartphone brands are increasing orders in the second quarter to ensure adequate inventory levels, thereby boosting demand. Suppliers aiming to quickly achieve break-even targets are expected to push UFS contract prices up 10%-15% in the second quarter.
Enterprise-class SSDs are expected to increase sequentially in the first half of the year, benefiting from growing demand from communications service providers in North America and China. With lower order fulfillment rates for high-capacity SSD orders, suppliers continue to influence price trends, potentially forcing buyers to accept higher prices. Enterprise SSD contract prices are expected to rise by 20%-25% in Q2, the highest increase of any product line, as some buyers try to increase inventory levels ahead of the 2H24 peak season.
Due to the off-season for terminal sales, client SSDs have been more cautious in their buying strategies, and some PC OEMs have cut their orders for 2Q24. The rapid rebound in prices is likely to dampen order growth in the second half of the year, with PC client SSD contract price increases expected to be lower than enterprise SSDs in the second quarter, around 10%-15%. Due to the lack of stockpiling demand from downstream customers, the sales volume of NAND Flash wafers continued to decline after the Spring Festival. However, rising prices have caused suppliers to be unable to meet orders from Chinese smartphone brands, leading suppliers to turn to module manufacturers. As a result, Chinese module manufacturers continue to maintain high inventory requirements to expand their cooperation with smartphone brands. As manufacturers are keen to reach their profitability targets quickly, NAND Flash wafer contract prices continue to rise. Nonetheless, due to sluggish retail market demand, the growth is expected to be significantly lower than in the first quarter, with an expected increase of 5%-10%.
Demand was weak, and DRAM and NAND flash spot prices fell
DRAM spot market
Due to tepid channel demand, DRAM spot prices continued to fall. In addition, both DDR4 and DDR5 products have fallen more significantly recently. At the same time, spot traders, who had previously accumulated inventories, are now rushing to sell as the overall demand outlook is not particularly positive. As a result, spot prices are generally weakening. The average spot price of mainstream chips (i.e., DDR4 1Gx8 2666MT/s) fell from $1.936 last week to $1.921 this week, a decrease of 0.77%.
NAND flash spot market
Continuing last week, under the influence of the continued sluggish demand in the channel market, the spot price continued to decline and expanded, but the sales pressure was slightly lighter than that of DRAM. The 512Gb wafer was traded at around $3.9, which is lower than the contract price, indicating that consumer demand levels have not yet recovered. Spot 512Gb TLC wafers fell 1.98% for the week to $3.764.
SK hynix HBM accounts for double-digit DRAM sales in 2024
SK hynix Kwak Noh-Jung said at the shareholders' meeting a few days ago that HBM will account for double-digit sales of total DRAM in 2024, and supply will remain tight in 2025.
Kwak Noh-Jung, in response to a shareholder's question about why SK hynix still posted a net loss of 9 trillion won in 2023 despite the boom in AI but HBM's hot sales, said that although the price of its DRAM products, which accounted for the majority of sales, was declining, HBM's sales in 2023 accounted for only single digits.
In addition to the increase in the share of HBM, Kwak Noh-Jung also said that standard DRAM prices will improve from the fourth quarter of 2023, which will improve the overall profitability of the memory business across the board. In the direction of NAND Flash and SSD, SK hynix has shifted its strategic direction from focusing on market share to improving profitability and continuing to promote its high-margin product portfolio.
Finally, SK hynix is restructuring its image sensor CIS business and has no plans to exit the business. At the technical level, SK hynix believes that HBM can be customized according to demand and gradually move away from the identity of a generic product. Earlier, South Korean media The Elec reported that SK hynix has received an order from Google for a customized HBM.
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