In the previous part of the series, we saw that DRAM (dynamic random access memory) demand is inelastic. However, NAND (negative AND) demand is elastic. So when NAND prices increase, demand decreases. In 2017, the NAND market transitioned from 2D planar to 3D technology, which created a supply shortage.
However, strong demand from mobile and server verticals pushed up NAND prices. This price increase did not last long as suppliers started bringing their 3D NAND production capacity online. They benefitted more from volume sales.
Apart from the DRAM market’s three players, Samsung (SSNLF), Micron (MU), and SK Hynix, NAND has three more players: Intel (INTC), Western Digital (WDC), and Toshiba (TOSBF). Thus, the NAND market is more competitive than the DRAM market. Samsung, Toshiba, and SK Hynix reported over 15% sequential growth in NAND revenue, largely due to higher volumes, according to data from DRAMeXchange.
NAND outlook for 2018
For 2018, analysts have a mixed forecast for the NAND market. Some believe that the NAND market will move towards equilibrium, while some expect a little oversupply in the NAND space by the end of 2018 as most vendors improve capacity by starting mass production of their 64-layer and 72-layer NAND.
DRAMeXchange expects NAND flash bit to increase by 43% in 2018, whereas it expects demand to grow by 38%, which would create an oversupply situation and cause prices to fall. Micron’s NAND ASP (average selling price) fell 3% in fiscal 1Q18. However, Samsung would likely be less affected if prices fall, as it is ahead of the industry in the 3D NAND transition. However, the company would likely face strong competition from Micron.
Next, we will see how the memory market environment could impact Micron’s earnings in 2017 and 2018.