NAND Memory Prices Likely to Continue Free Fall
Prices for NAND flash memory chips are projected to tumble again in 2007 by dropping a projected 65%, after a 60% drop in 2006. Various NAND companies including Samsung and Hynix started dumping 8-Gbit NAND on the market late last year. This has sent average selling prices (ASP) plummeting in January and causing chaos in the contract market. Large OEMs are walking away from their contracts with NAND manufacturers and instead are choosing to buy cheaper parts on the spot market. Spot prices for an 8-Gbit NAND flash memory fell to a record bottom of $5.15 at the end of January 2007, down from $9.10 the week of December 1, 2006.
With pricing pressures in the 60% range for the second year in a row NAND manufacturers are going to suffer. SanDisk Chairman and CEO Eli Harari mentioned in their 3QF06 conference call that memory companies can sustain price reductions in the 40% range, but 60% reductions are not sustainable in the long term. At the time of the conference call last fall he did not think 2007 would be as bad as the 60% experienced in 2006 because of reduced supply as suppliers move production capacity to DRAM, which currently would yield better profits. However, most industry analysts believe 2007 will be just as bad for NAND even if some production capacity is transitioned to DRAM. Samsung, Hynix and Micron have all scaled back their production targets by moving capacity to more profitable DRAM. However, an industry shift toward multilevel-cell NAND technology and new and aggressive die shrinks, is expected to keep the NAND memory market in an oversupply situation until the third quarter of 2007. Samsung and Toshiba recently announced the first sub 60-nanometer NAND flash memory parts.
Industry analysts estimate that ASPs will fall by 25 to 30 percent in the first quarter alone followed by another 20 percent drop in the second quarter. The second half of the year will experience modest price declines of 10% before NAND memory supplies get back to being a bit in undersupply in late 2007 or early 2008. Electronic and system OEMs are the big winners here as they can either pack more memory into products or reduce the price of existing products. While the low prices are likely to spur more multimedia cell phone models there are no now products on the horizon that could significantly boost NAND flash consumption. Apples’s iPhone is priced too high to generate significant sales and solid state storage devices envisioned for ultra-energy efficient laptops are not due in mass until a few years down the road.
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