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Economic Uncertainties May Limit Global NAND Flash Revenues

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Market oversupply will reduce demand

According to DRAMeXchange, a division of TrendForce, an increase in SSD (solid-state drive) demand and average memory density will lead to a 44% YoY (year-over-year) growth of global bit demand in the NAND (negative-AND) flash market in fiscal 2016. The top NAND flash memory suppliers, Samsung (SSNLF), Toshiba, SanDisk (SNDK), Micron Technology (MU), SK Hynix, and Intel (INTC), had market shares of 31.5%, 20.5%, 15.4%, 13.8%, 10.9%, and 7.8%, respectively. Next year, NAND flash suppliers will look to reduce costs and focus on the development of 3D-NAND flash to fuel demand. Analysts expect NAND flash bit output to increase by 50% in 2016.

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“Market supply will greatly exceed demand next year, causing sharper price decline,” said Sean Yang, DRAMeXchange’s research director. “Our forecast for 2016 indicates that worldwide revenue of NAND Flash industry will grow by just 0.2% year on year to US$26.6 billion. Suppliers are expected to face increasing pressure on their operating margins.”

3D-NAND expected to comprise 11% of total NAND flash output

Samsung has started mass production of 3D-NAND flash memory and has gradually increased its market share in this segment. Peer companies will also look to increase supply of memory products in this segment and the industry is expected to grow 11% YoY, manufacturing 16.7 million wafer starts in 2016.

Yang also noted: “Though 3D-NAND Flash is expected to account for just 11% of the total NAND Flash output in the fourth quarter of 2015, the share will rise rapidly to 30% by the end of 2016. This in turn will lower the costs of SSDs, leading to an increase in the SSD adoption among OEM system vendors.” Together, Micron, SanDisk, and Intel constitute 16.7% of the iShares PHLX Semiconductor ETF (SOXX).

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