Strong bit demand, weak capex spending to favor Flash suppliers

USA: The flash memory market is setting up for a dramatic shift in the supply-demand balance—one that will greatly favor NAND flash memory suppliers in the next several years, according to IC Insights' recently released Mid-Year Update to the McClean Report.

Unit shipments and bit volume demand continue to increase. At the same time, however, there has been a severe reduction in flash memory capital spending. Combined, these two factors will put upward pressure on average selling prices through 2012.

NAND flash memory unit shipments have declined only one year (2001) since IC Insights started tracking this market in 1993. Moreover, flash units are not forecast to decline through 2013 and that includes 2009 with all of its economic challenges. Unit growth has resulted in very strong flash bit volume growth as well.

Driven by handheld and wireless consumer, computer, and communications devices, flash bit volume increased by triple-digit figures between 2005 and 2008. As difficult as the global economy has been in 2009, NAND flash bit volume is still forecast to increase 83 percent!

Samsung, Micron, and other flash manufacturers show no signs of slowing flash bit volume growth in their forecasts. In fact, their roadmaps suggest that bit volume will continue to roughly double each year through 2013.

While unit and bit-volume demand are forecast to escalate, industry-wide capital spending for NAND flash memory has been severely curtailed. Fig. 1 shows NAND bit volume increasing through 2009 yet total industry-wide capital spending for NAND flash memory is forecast to decline 73 percent in 2009 to only $3 billion (NAND accounts for 99 percent of total flash bit volume). Moreover, no significant expansion or capex spending plans have been announced for 2010, according to the Mid-Year Update.Source: IC Insights, USA

With unit demand increasing and a minimal amount of new facilities and upgrades planned, conditions are setting up for average selling prices to move higher through the balance of 2009 and into 2010. In fact, the rise in ASPs could last well into 2012 since it will take some time before new capacity expansions are brought online.

This trend, though a potential burden to OEMs, could be a significant blessing for flash suppliers who have seen only steep price declines for their products over the past several years.