NAND flash manufacturers expect to cut capital expenditure by 2% in 2019.

updated at 2019-01-19 10:59:21

According to DRAMeXchange, NAND flash manufacturers will continue to cut capital expenditure by 2% in 2019. Its estimated that those flash manufacturers who plan to cut down cost mainly come from Korea, but DRAMeXchange thinks American manufacturers may take similar actions as the expenditure of NAND flash in the global market has fallen by 10% between 2017 and 2018.

The reason for spending cuts is easy to understand when NAND flash is still oversupplied. DRAMeXchange said that although manufacturers have adopted some strategies, it is hard to improve this situation because demand for end products such as laptops, smartphones and servers continues to be weak. Tech companies may not buy a pile of memory and put them into products they are trying to sell.

Flash manufacturers such as Samsung are keenly aware of these problems. Therefore, Samsung has revised its expected profit for the latest quarter because of lower demand for memory and smartphones than expected. DRAMeXchange says that Samsung accounts for 30% of the NAND flash market, and if it is struggling to adjust its spending, so are other NAND flash manufacturers.

Flash manufacturers such as Samsung will reduce capacity throughout 2019 to solve the problem (that is, reducing capital expenditure). In fact, as the company has shifted to 92/96-tier 3D NAND products and more space are needed, production is expected to decline. By the end of 2019, new products in Samsung will only account for about 32% of output, while 64-tier and 72-tier production will still account for more than 50%. As a result, the manufacturers are changing from "production will decline because we are making new products!" to we have to cut costs".

Take another look at the capacity adjustment of suppliers. DRAMeXchange points out that Samsung will reduce capacity in 2019 compared with 2018 as continuously reducing capacity of 2D NAND and consuming more plant space for 92-tier process. SK Hynix, Toshiba and West Digital are expanding new plants of M15 and Fab6, respectively. However, similarly they are also affected by reducing capacity or switching to produce original NAND process, which causes output growth is lower than expected due to expected production growth rate of 50% and 40% in SK Hynix and Toshiba/Western Digital, respectively. According to DRAMeXchange, both production growth rate lower than expected is about to reflect the cold market demand this year.

Microns plant in Singapore won't produce mass capacity until 2020, so its capacity remains almost unchanged throughout this year. In addition to improving the capacity of plant in Dalian, Intel has not announced any other expansion plans. Overall production growth rate of Micron and Intel can reach 40% in 2019, which is significantly lower than that of over 45% in 2018.

However, for consumers, the loss of manufacturers means everyone can get the bargains. DRAMeXchange said, "The price of NAND flash is expected to fall by 20% in the first quarter of 2019, 10% higher than previously forecast. There will be a further decrease by about 15% in the second quarter. Given the upcoming peak season in the second half of 2019, prices will continue to fall by about 10% slightly in each quarter." All in all, price of NAND flash is expected to fall by 50% in the coming year.

Previous forecasts show that price of NAND flash will fall by 10% to 25% in 2019 (depending on the storage type). Considering these numbers double in a few months, it is suggested that NAND flash manufacturers are unlikely to get out of the oversupply market immediately.