NAND Flash Giants Suffer Revenue Loss of 16.8% in 4Q18

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DRAMeXchange, a division of the global market research firm TrendForce, reports that the rising economic uncertainties caused some server manufacturers to delay restocking or cancel orders, and compelled those upstream in the supply chain to make adjustments to their production lines, damaging their ability to stock up. Furthermore, Apple sales did not meet expectations in the new quarter, and the need to switch phones experienced a decline; laptop demands were impacted by the Intel CPU shortage. Bit-shipments did not perform as well as expected, despite the continual increase in average memory storage. All this led to a drop in revenue by 16.8% QoQ for brand owners in 4Q18.

Looking back at the sales performance for the whole 2018 year, annual bit-shipments rose by more than 40% compared to 2017, despite the quarterly decline in prices across all product categories. Total revenue still continued to grow, and reached a record high of $63.2 billion, a growth of 10.9% from 2017.

Seasonal headwinds will worsen the demand slump in 1Q19, so smartphone and server manufacturers will continue to make adjustments to their inventories. Hence, the total NAND Flash bit shipments for the period are projected to register a QoQ decline. Also, major NAND Flash suppliers will be lowering their prices to retain their market shares. Total NAND Flash revenue will be dragged down by both falling unit prices and falling demand, and continue its decline.

Samsung

Samsung’s bit shipments for 4Q18 shrank by more than 7% QoQ as a result of weakening demand in the smartphone, server, and notebook PC markets. Samsung’s ASP also fell sharply by more than 20% QoQ, as it had to make downward corrections on prices in order to reach its sales targets. Samsung’s revenue for 4Q18 came to US$4.304 billion, showing a decline of 28.9% QoQ.

In face of the ongoing market oversupply, Samsung intends to maintain its production capacity for 3D NAND Flash at the current level through 2019. Samsung will also scale back its production capacity for 2D NAND Flash in accordance with the falling demand for the older architecture. On the other hand, Samsung is sticking with its plan to erect a second fab building at the site of its Pyeongtaek plant. From the technology angle, Samsung has reached maturity with the development of the fifth-generation process. However, the company will hold back on expanding the production capacity of the advanced technology as it wants to avoid an excessive growth in its output.

SK Hynix

SK Hynix’s bit shipments for 4Q18 increased by just 10% QoQ. The lack of bit shipment growth was attributed to disappointing developments in the smartphone market, such as OEMs focusing on inventory closeouts and sales of flagship smartphones falling short of expectations. SK Hynix’s ASP was also affected by increasingly conservative procurements of server SSDs and other demand factors, and fell significantly by 21% QoQ in 4Q18. Their quarterly NAND Flash revenue dropped by 13.4% QoQ to US$1.587 billion.

The latest analysis of SK Hynix’s capacity and technology plans finds that the company is maintaining its schedule for ramping up production at the newly built M15. To lower cost and improve competitiveness, SK Hynix has begun applying the 96L 3D NAND architecture to its product lines, among which 96L UFS 2.1 products are planned to be mass produced in 2Q19. However, a period of time is needed to introduce this type of product to the market during the initial stage. Therefore, SK Hynix’s shipments will still consist mainly of 72L products in 2019.

Toshiba

Toshiba’s bit-shipments in 4Q18 barely held steady from the previous quarter, as its sales performance was affected by the weaker-than-expected sales of the latest iPhone models and the shortage of Intel CPUs that has been disrupting shipments of notebook PCs. Its ASP also fell by 15% QoQ due to the significant fall in contract prices for various products, and its fourth-quarter revenue came to US$2.731 billion, showing a drop of 14.7% QoQ.

At the request of Western Digital, Toshiba has scaled back the total production capacity of production lines at Yokkaichi, leading to a drop in overall production capacity in the area. They will focus their capacity expansion efforts on Fab 6 in 2019, but 64L will nevertheless remain to be their main production process.

Western Digital

Server and mobile phone demands failed to meet expectations, due to influences from the US-China trade dispute. Despite the strong growth in the average density of products shipped to the SSD market, Western Digital increased its bit shipments by just 5% from the previous quarter. Its ASP also fell by 18% QoQ because of the exacerbating effects of the slump in demand and the sharp price downswing for various products. The company’s total NAND Flash revenue for 4Q18 fell by 14.2% QoQ to US$2.173 billion.

Western Digital will maintain its strategy of conserving production capacity and capital expenditure. The company’s total annual output for 2019 is projected to be 10-15% lower than originally planned. Western Digital is currently negotiating with Toshiba over the joint investment on the latter’s plant in Iwate Prefecture. This negotiation will become the key to ensuring Western Digital’s future competitiveness.

Micron

Micron was able to sustain a bit growth of more than 10% QoQ thanks to strong sales of SATA Enterprise SSD and growths in shipments of UFS and uMCP products. However, Micron’s ASP was affected by the general decline in prices of NAND Flash products and fell by more than 10% QoQ. On the whole, Micron’s NAND Flash revenue for 4Q18 dipped by 2.2% QoQ to $2.179 billion.

For 2019, the bit output growth from Micron will come mostly from technology migration. The company will also widen the adoption of the 96L architecture so that the technology will be present in more of its offerings for various storage applications. All these will help the company maintain an output growth near the average level of the industry.

Intel

In addition to being the market leader in server SSDs, Intel also benefitted from clients who switched to higher capacity configurations and 64L products in the fourth quarter, keeping the growth of their bit-shipments above 15%. Their ASP, however, dropped by 10~20% because of the sharp downswing in contract prices of server SSDs in 4Q18, and their overall revenue increased just slightly by 2.4% QoQ to US$1.107 billion.

Intel’s production and technology goals for this year include ramping up the second-phase facility of the Dalian operation to its full capacity. On the other hand, they will continue their transition into 96L products, whose output share is forecasted to reach near 30% in 2H19.