NAND industry supply
In the previous part of this series, we learned that there’s strong demand for NAND (negative-AND), especially in the data center market.
Because NAND demand is elastic, its sales are affected by its prices. The only way memory makers can earn money in NAND is through volume increases or cost reductions. This has seen increased capital spending in 3D NAND capacity.
SEMI (Semiconductor Equipment Materials International) predicts that fab equipment spending will increase 9% in 2018 and 5% in 2019, with the highest spending coming from 3D NAND. It expects 3D NAND equipment spending to increase 3% in both 2018 and 2019. Among chip makers, SEMI expects Samsung (SSNLF) to lead in fab equipment spending.
Citing unnamed industry sources, South Korean newspaper Yonhap News Agency reported that Samsung plans to invest $7 billion over the next three years in the expansion of its NAND flash memory chip line located in Xian, China. The company is also adding a NAND line in one section of its plant in Pyeongtaek, South Korea. This plant was in the news in March 2018.
Tom’s Hardware, citing several South Korean newspapers, reported that there was a power outage in Samsung’s Pyeongtaek NAND fabrication facility on March 9, 2018, which damaged 50,000–60,000 wafers with V-NAND. This equates to ~3.5% of global NAND output. Such a disruption in supply could increase NAND prices.
Micron’s capital spending in NAND
On its fiscal 2Q18 earnings call, Micron’s (MU) CEO, Sanjay Mehrotra, stated that the company is transitioning to second-generation 64-layer 3D NAND and expects to achieve bit crossover in fiscal 2H18 ending in August 2018. Bit crossover is achieved when the yield from the new node reaches the yield from the previous generation’s node.
Mehrotra stated that Micron is also working on third-generation 3D NAND technology and plans to launch it by the end of 2018. Until the third generation, Micron will develop 3D NAND together with Intel (INTC). From the fourth generation onward, it will build 3D NAND by itself, as it has ended its flash partnership with Intel.
Mehrotra stated that Micron would adopt new technology architecture in fourth-generation 3D NAND in order to meet the broader market’s power, cost, and specification requirements.
Micron expects that all this capital spending will increase NAND industry supply by more than 45% in 2018 and speed up attach rates of SSDs (solid-state drive) in client, enterprise, and cloud applications.
Next, let’s look at Micron’s business segments and the factors driving demand in each.