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According to TrendForce research, looking at NAND Flash wafers, the pricing of which more sensitively reflects the market, suppliers are increasingly motivated to cut prices in exchange for sales due to weak retail demand since March and a more conservative outlook for shipments of other end products. The price of NAND Flash wafers is expected to begin falling in May and the supply of NAND Flash will gradually overtake demand in 2H22. The price decline of NAND Flash wafers in 3Q22 may reach 5~10%.
At the same time, TrendForce indicates that February’s contamination incident at Kioxia was expected to tighten the market in 2Q22 and 3Q22. However, as a consequence of rising inflation and the war between Russia and Ukraine, market demand for consumer products in the traditional peak season of the second half of the year is trending conservative and the prices of client SSD, eMMC, and UFS in 3Q22 will be flat compared to 2Q22, breaking from the original expectation that prices may rise. In terms of enterprise SSDs, as demand for data centers remains strong, no significant correction in demand has yet been observed. However, as the overall NAND Flash market gradually moves into oversupply, prices will only grow slightly by approximately 0~5% in 3Q22.
Weakening demand in a period of unabated production expansion, NAND Flash may face oversupply in 2H22
From the perspective of demand, due to the war between Russia and Ukraine, rising inflation, and the pandemic in China, overall demand for consumer electronics is weak. Demand for Chromebooks dwindled rapidly at the beginning of 2022 as exogenous demand from the pandemic disappeared. In terms of conventional notebooks, the situation with commercial models and consumer models present a divergence. Demand for commercial notebooks is benefiting from a return to the office occurring in many countries, while the opposite is true for consumer notebooks. Therefore, overall demand for notebooks in 2022 will be lower compared to demand in 2021. In terms of smart phones, the production volume of Chinese brands has been suppressed due to China’s flailing against the pandemic and government lockdowns stemming from a continued insistence on a dynamic zero-COVID policy, resulting in continuous downward revisions of global smart phone production for 2022.
In terms of supply, Samsung is focusing on substantial future growth in the enterprise SSD sector and continues to maintain its original capacity expansion plan, especially after its NAND production line was derailed due to the Xi'an lockdown at the end of last year. In order to stabilize future plant operations, the capacity of its P2L fab in South Korea continues to increase. Yangtze Memory Technologies (YMTC) will also expand its wafer input plan in 2H22. Since the 128L yield rate has reached the company's goal and it had successfully broken into the tier 1 smartphone supply chain in 1H22, YMTC will also accelerate production at its second factory in Wuhan. Therefore, TrendForce indicates, since an overall weakness in demand will linger in 2022 yet certain manufacturers will maintain a pattern of expanding production, the NAND Flash market will face oversupply in 2H22. As mentioned above, the prices of various products will be flat or experience reduced growth in 3Q22.