Prepare for a spike in SSD prices

A shortage in flash memory will mean a price jump

Prepare for a spike in SSD prices

SSD prices have been in a freefall for the last few years thanks to increased output by NAND flash memory makers and those vendors converting their production to 3D NAND, which offers increased density at a lower cost. That's why you are seeing so many 1TB SSDs on the market these days, but it's also why prices are going up.

However, going into the busy fourth quarter, the industry has been hit with a double-whammy of lower production and increased demand, and at that point it's basic economics of supply and demand. The result could be a spike in prices in the coming months.

A report in China's CTimes states that revenue is up considerably for NAND flash makers such as Samsung, SK Hynix and Toshiba because prices have risen recently. Part of the reason is the increasing demand of 3D NAND flash, which stacks the memory cells in layers to achieve greater density in a smaller space. Vendors are converting their fabrication plants to handle 3D, but it takes time and money. Lots of money. 

"The NAND Flash market outlook for the fourth quarter of 2016 indicates that NAND Flash supply will be under greater strain with the advent of the peak shipment season season for end devices," Sean Yang, research director of DRAMeXchange, told CTimes. "Therefore, contract prices for various NAND Flash products will see larger increases, which in turn will take suppliers’ revenues and operating margins to new highs for this year."

SSD shortage

As SSD prices have dropped, more companies are using them in place of hard drives, which has driven a shortage. Just last month, Acer delayed shipments of a new series of laptops sold under the Swift brand name, citing a shortage of SSDs

The shortage is undoubtedly driven by the holidays, as well, but at this stage of the game, what will be sold in the fourth quarter has already been built and is in stores. Q1 always sees a massive drop off in sales compared to Q4, so the timing might ease up demand and bring a little pricing mercy in the coming months

Each of the NAND players has its own agenda, with some focusing more on 3D NAND than others. Samsung, for example, will continue to focus on client- and enterprise-grade SSDs. SK Hynix will begin sampling the fourth-generation NAND Flash by the second half of next year, which means a slow ramp up. Toshiba will begin production at a new fab this quarter to produce 48-layer 3D NAND and will expand it next year to produce 64-layer 3D NAND. It will also begin construction of a new facility in February.

In the U.S., Western Digital has started mass-producing products using its 48-layer 3D-NAND Flash, while Micron has begun shipping mobile products based on the 3D NAND architecture, such as consumer SSDs. Intel, which also has a NAND business, albeit modest ($649 million annually), started shipping 3D NAND chips in this quarter.

Copyright © 2016 IDG Communications, Inc.

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