Inventory replenishment has warmed up from mid-December, 1H'Jan. mainstream NAND Flash contract price is up 2-5 percent

TAIWAN: According to DRAMeXchange, the research department of Trendforce, market expected NAND Flash price would weaken after year-end holiday inventory re-stocking peak after November. However, Toshiba power outage accident made memory card customers to initiate inventory replenishment for Chinese New Year holiday starting from mid-Dec. given the expectation sentiment on output shortage in January.

Thus, NAND Flash price indicated the rebound trend in December. Besides, some vendors gain the OEM orders from some smart phone and tablet PC clients, resulting in the tighter supply in first half of January. That is, 1H’Jan. mainstream MLC NAND Flash contract price raised 2-5 percent.Source: DRAMeXchange, Taiwan.

Since year-end holiday memory card & UFD sales roughly met the market expectation, we expect inventory replenishment movement for Chinese New Year holiday will demonstrate the stable pattern by the end of Jan. if heavy snow in China does not significantly impact on the logistic systems.

Therefore, the NAND Flash price is likely to sustain the mildly upward trend or keep stable before Chinese New Year. However, NAND Flash price will likely soften after Chinese New Year holiday since demand for memory card & UFD will be gradually slowing down in the coming slow season and momentum will be shifted to some system product customers’ OEM orders.

Toshiba’s power outage accident, restock demand for new launch effect and Chinese Lunar New Year holidays in Jan. & Feb. will help offset the 1Q11 slow-season effect, however, the slow-season effect for memory card & UFD and electronic system product customers still will pose the oversupply status in 2Q11. Therefore, NAND Flash price will mildly rebound in 1Q11 and still indicate the declining pattern in 2Q11 with the traditional slow season effect.

We expect more 3C-related vendors to launch new high-performance emerging mobile devices and ramp up the new product shipment in 2H11. The new product launch effect from more new smart phone, tablet PC & portable PC models equipped with high NAND Flash storage as well as the recovering economy in advanced markets will further enhance the 2H11 hot-season effect so that it will likely further boost the restock demand to trigger the price rebound in 3Q11.

Meanwhile, since most NAND Flash makers will adjust their bit output growth target based on the real market demand, we expect 2011 NAND Flash market to be in the status of more balanced but with more significant seasonality pattern accordingly. We expect 2011 NAND Flash ASP to decline 29% YoY and mainly reflect the cost-down effectiveness of process technology migration, following the 15% YoY price decline in 2010.Source: DRAMeXchange, Taiwan.