Storage Price Trend Analysis
The storage market has recently undergone dramatic fluctuations, resembling a rollercoaster ride, particularly in the post-pandemic era. Consumer interest in electronic products has waned, reflecting a dynamic shift in market conditions that has pushed demand to historically low levels. The impacts of the pandemic continue to reverberate, reshaping consumer behavior and altering what once was a booming industry.
Manufacturers, faced with excessive inventory, have been compelled to resort to price reductions to stimulate demand and correct inventory levels. Their efforts have shown some results, as the storage market began to enter an upswing. However, this uphill momentum was short-lived. Recent reports indicate that storage prices are embroiled in yet another upheaval. This ongoing volatility not only has manufacturers on edge but also raises concerns among consumers and the broader electronics industry regarding the sustainability of the market's future.
Price fluctuations in the storage product ecosystem are often indicative of broader market dynamics and industry trends. A closer examination of various product categories over the past few months reveals a consistent downward trend across different types of storage devices such as DDR, SSD, LPDDR, and eMMC.
For DDR products, both the DDR4 16Gb 3200 and DDR4 8Gb 3200 have experienced a steady decline in prices from July 30 to October 8. This can be attributed to the continuous advancements in storage technology, where newer, high-performance products create competitive pressure on older DDR4 models while overall market demand fails to show significant growth, leading to an oversupply scenario.
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In the SSD category, the prices for OEM 256GB SATA and 512GB SATA SSDs have also been on a downward trajectory. This decline is primarily due to a reduction in manufacturing costs and fierce market competition where producers are slashing prices to gain market share.
Similarly, LPDDR and eMMC product categories show a consistent decline in prices. The slowdown in the mobile device market has dampened demand for LPDDR while emerging advanced storage technologies have led to a decrease in the need for eMMC. The emergence of UFS and other high-performance technologies has progressively reduced eMMC's market share.
Focusing on recent months—September and October—the weak demand for PCs and consumer electronics has led to marked declines in the contract prices of both DRAM and NAND.
In September, the price downturn for DRAM and NAND intensified. According to DRAMeXchange, the contract price for DDR4 8Gb 1Gx8 dropped by 17.07% at the end of September compared to the end of August, landing at $1.70. Notably, since October of the previous year, DRAM prices had been rising steadily until August when they dipped by 2.38%—the first price drop for DRAM.
Concurrently, weak demand and excess inventory leads to a decrease in TLC NAND flash wafer prices, which has also resulted in declines in MLC and SLC wafer prices. For instance, the contract price for the 128Gb 16Gx8 MLC used primarily in flash products like storage cards and USB drives fell by 11.44% in September to $4.34, despite NAND prices stabilizing for the past six months.
TrendForce also highlighted that DDR4 product inventories are considerably higher than those of the more recent DDR5, allowing DDR5 memory prices to remain insulated from the price fluctuations. October saw continued instability in the prices of DRAM and NAND, with reports from TrendForce indicating that the trading volume in the DRAM spot market remained sluggish, flagging little chance for a rebound before the year-end.
For the week of October 2nd to 8th, the average price of mainstream chips (DDR4 1Gx8 2666MT/s) fell by 0.26% from the previous week, indicating that the supply-demand landscape of the spot market remains unchanged. The week also witnessed a dip in the spot price of 512Gb TLC wafers falling by 0.58% to $2.595, largely attributing this to a lack of improvement in market conditions and weak buyer sentiment.
In light of the demand slowdown in the IT sector, major flash memory manufacturers are pivoting from NAND production in search of more lucrative opportunities in DRAM production, especially HBM memory due to surging demand from the artificial intelligence sector.
Key 3D NAND manufacturers such as Kioxia, Micron, Samsung, and SK Hynix are considering scaling back non-volatile memory production and reducing investments in expanding flash memory capacity. Such strategies could stabilize 3D NAND prices and likely reduce DRAM prices in the short to medium term.
Companies like Samsung and SK Hynix are reportedly shifting their focus to DRAM manufacturing as demand remains robust. They are exploring options to convert some NAND production lines to focus on DRAM and HBM, thereby aligning their production capacity with market demands. For instance, Samsung may convert its P4 production line, while SK Hynix plans modifications at its Cheongju M14, M15X, and M16 facilities.
DRAM manufacturers are also actively transitioning production capacity towards DDR5 expansion.
Recently, Nanya Technology announced a significant 20% decrease in sales volume for Q3, which failed to improve inventory levels. Nevertheless, the company aims to shift 15% of its capacity to DDR5 production in Q4, expecting a gradual increase in DDR5 contributions starting in December.
Nanya explained that the sales decline was primarily driven by economic downturns and dipped demand in regions like the United States and Japan, while the demand in China and Europe weakened significantly.
The company's foremost objective is to introduce new processes into the market and launch highly demanded products with strong growth potential.
SSD manufacturers have also kicked into gear, initiating clearance strategies to free up inventories. Kingston, the largest global storage module manufacturer, has begun discounting mid-tier products.
Semiconductor analyst Lu Hang pointed out that as traditional DRAM prices decline, recognizing inventory losses has become a norm.
Lu watchfully noted that with current surging inventories in the market, Kingston’s situation shows a short lifespan before joining the discount bandwagon. He anticipates other manufacturers will follow suit, particularly paying attention to brands like ADATA, Transcend, and Phison.
Additionally, market whispers indicate that Samsung's mobile solid-state drives are also undergoing substantial price cuts. Notably, the Samsung 2TB T9 SSD, which had fluctuated around $1600 previously, has recently witnessed a price drop of approximately $300, settling close to $1300. Similarly, the price of the Samsung 2TB T7 SSD has dipped below $1000, whereas it had peaked at around $1600.
The storage sector serves as a bellwether within the semiconductor landscape, with its performance intimately linked to industry demands. Variations in supply and demand can significantly sway market conditions. Analyzing storage price fluctuations can be primarily attributed to these two factors.
In the first half of the year, the observable recovery in the storage sector can be attributed to two main facets.
From the demand side, the boom of artificial intelligence, along with the gradual recovery in consumer electronics, has contributed to a preliminary warming of the storage market. For example, the advent of large language models driven by artificial intelligence requires extensive data storage and processing. Furthermore, after a prolonged slump, the slight recovery in the consumer electronics industry has sparked growth in the storage sector, prompting certain manufacturers to ramp up inventory in preparation.
Regarding the supply side, manufacturers reducing output and shifting production capabilities to higher value-added products also support a healthier market outlook. In past downturns, storage chip manufacturers proactively decreased output to balance the market dynamics. Following these efforts, supply gradually decreased, alleviating the oversupply condition and fostering an environment suitable for price recovery.
However, the resurgence was short-lived as a new wave of challenges emerged, again intersecting both supply and demand factors.
On the demand front, global economic uncertainties, rapid technological advancements, and the actual recovery trajectory of the consumer electronics industry may disrupt the balance that the storage market had just begun to establish.
For instance, uncertainty in economic conditions could dampen consumer and enterprise confidence and spending, leading to decreased demand for storage products; similarly, if technological advancements don’t meet expectations or new alternatives arise, demand may also be negatively impacted.
On the supply side, a rapid recovery of capacity and cutthroat competition may again plunge the market into duress.
For instance, in the initial recovery phase, manufacturers may gradually restore production capacity based on an anticipated increase in market demand. If this rebound occurs too quickly, outpacing demand growth, it could lead to an oversupply situation that jeopardizes previously established price stability. Additionally, the storage industry's allure of high profit margins invites new competitors, leading to aggressive competition among various firms, and pressuring existing manufacturers regarding market share and pricing strategies.
In the short term, pricing pressures in the storage market are expected to continue. For Q4, only HBM prices are anticipated to show an uptick. According to TrendForce, general DRAM prices for the fourth quarter are expected to remain relatively flat, ranging from a 0% to 5% increase; however, with HBM’s growing market share within the DRAM segment, overall DRAM average prices may surge between 8% to 13% compared to the prior quarter.
While the growth rate of general DRAM prices stands at 8% to 13% for Q3, projections indicate stagnation for Q4 due to economic contraction causing a slowdown in consumer demand, further compounded by an uptick in supply from Chinese memory manufacturers. The expansion of HBM manufacturing by storage vendors will likely contribute to a general decline in standard memory supply, potentially influencing prices upward, though insufficient to counter the broader demand slowdown. TrendForce anticipates fourth-quarter contract prices will decline between 5% to 10%. Moreover, it’s expected that LPDDR5X DRAM prices will remain stable due to comparatively appropriate inventory levels.
On a long-term scale, the data storage industry is witnessing continual growth in market size and demand. The proliferation of digital technologies, cloud computing, big data, and artificial intelligence trends portend continuing increases in data storage requirements. Solid State Drives (SSDs) are gradually supplanting traditional Hard Disk Drives (HDDs), having outperformed HDDs across parameters of performance, efficiency, energy savings, and reliability. Moreover, forecasts suggest that by around 2026, SSDs will enjoy a pricing advantage over HDDs as well. Emerging technologies such as all-flash storage, DDR5, DNA storage, and holographic storage are poised to introduce new growth points within the data storage sector.
In conclusion, while the storage market grapples with the challenges of price reductions and fluctuating demand in the immediate future, the combined forces of technological innovation, sustained market demand growth, and a competitive industry landscape are set to shape a more diversified and rapidly evolving market.