TrendForce’s latest research indicates that, as production cuts to DRAM and NAND Flash have not kept pace with weakening demand, the ASP of some products is expected to decline further in 2Q23. DRAM prices are projected to fall 13~18%; NAND Flash is expected to fall between 8~13%.
On the other hand, based on the weekly updates on the DRAM and NAND flash spot markets by TrendForce, the spot markets for DRAM and NAND flash continued to decline this week. Details are as follows.
DRAM Spot Market
Spot prices of DDR4 products have been dropping incrementally for several consecutive days, and buyers in the spot market are mostly waiting for further developments. However, there are more quote inquiries for DDR5 products because the supply gap hasn’t been bridged. As a result, there is now an uptick in spot prices of DDR5 products, and the divergence between DDR4 and DDR5 products in terms of price trajectory is expected to continue for several weeks. Nevertheless, spot prices of DDR4 products are showing no sign of rebounding in the near future. The average spot price of mainstream chips (i.e., DDR4 1Gx8 2666MT/s) fell by 0.74% from US$ 1.618 last week to US$ 1.606 this week.
NAND Flash Spot Market
European and American spot markets have yet to recover in purchase sentiment, while some Asian markets, due to the recuperation of the Chinese market, have slightly risen in purchase willingness. Overall spots have not experienced any apparent fluctuations from South Korean suppliers’ announcement of production cuts, despite sellers aggressively adjusting their prices and pursuing orders, which led to a restricted level of overall transactions and a small drop in prices. 512Gb TLC wafer has dropped by 0.35% in spot prices this week, arriving at US$1.431.
Amid a prolonged market downturn and persistent weakness in end demand, the world’s top three memory chipmakers – Samsung, SK Hynix, and Micron – have implemented production cuts in an effort to control the continuing decline in memory prices through supply management. Recently, news emerged in the memory channel market that Micron had notified its customers that starting in May, it will not accept inquiries for DRAM and NAND Flash below current market prices.
According to TrendForce, the situation is not widespread at the moment, but is limited to low-priced memory chips. As for other product categories with high inventory levels, they still cannot avoid the situation of falling prices.
Although DRAM suppliers have actively reduced production, the output bit volume has not yet reached an effective convergence in 2Q23, so the quarterly contract price decline will be greater than originally expected, with an expected drop of more than 15%. TrendForce has observed that there is a strong wait-and-see atmosphere on the OEM side. While the willingness to purchase DRAM has increased, the premise of the deal is that low-priced quotes are attractive enough to OEMs. Due to poor demand prospects, the purchasing behavior of buyers still appears to be passive.
TrendForce pointed out that Micron’s subsidiary brand, Spectek, has slightly raised prices for its products this week, especially in the low-priced chip segment, indicating a reluctance to further reduce prices. Therefore, trading in the spot market appears stagnant, similar to the strong wait-and-see attitude mentioned in the contract market.
As suppliers have already entered a stage of significant losses, it is necessary to continue to expand production cuts to avoid prices from collapsing again. Among them, DDR4 still has a price decline due to high inventory levels and weak demand, while the supply of DDR5 is limited by the PMIC compatibility issue, resulting in an upward trend in spot prices.
On October 7, 2022, the U.S. government imposed export regulations restricting China’s access to semiconductor technology. In particular, the sanctions pertained to manufacturing equipment required in the production of 16nm/14nm or more advanced logic chips (FinFet, GAAFET), 18nm or more advanced DRAM chips, and NAND Flash with 128 or more layers. It’s evident that the U.S. intends to restrict China’s semiconductor manufacturing to 1Xnm. Moving forward, 28nm processes are likely to be included in the next set of regulations as some equipment used in manufacturing 28nm nodes can also be utilized in more advanced processes.
TrendForce predicts that upcoming U.S. export regulations will further focus on 28nm processes. Not only can 28nm manufacturing equipment be used in more advanced processes, but tight restrictions have forced Chinese companies to focus their efforts on expanding their 28nm operations. 28nm processes can be used to produce a large variety of other products: SoCs, ASIC AI chips, FPGAs, DRAMs, NAND Flash, ISPs, DSPs, Wi-Fi chips, RF components, Driver ICs, MCUs, CISs, DAC/ADC chips, PMICs, and other core components in a wide range of applications. If the U.S. allows Chinese companies to accelerate the expansion of their 28nm processes, China’s importance in the supply chain for terminal products will continue to climb — ultimately setting back the U.S’s efforts to decouple itself from China.
China still unable to fully manufacture 28nm chips domestically as expansion exhibits signs of slowing down
China cannot fully rely on domestic production for their 28nm semiconductors. If the U.S. chooses to move forward with restricting China’s access to 28nm manufacturing equipment, expansion will surely grind to a halt. China currently possesses equipment that is able to clean, backgrind, etch, and sediment for 16nm/14nm or more advanced processes. However, this is not enough for China to achieve semiconductor autonomy. Semiconductor manufacturing is relatively complicated as it involves thousands of processes; Chinese factories are only involved in a few of the processes — the majority of which depend on American and Japanese factories. All in all, with China’s semiconductor industry largely focused on 28nm/40nm and more mature processes, it will be difficult for them to achieve semiconductor autonomy for processes more advanced than 28nm by 2028.
According to TrendForce, prices for 4Q22 contracts were mostly finalized in October in contract market. The QoQ decline in the overall DRAM ASP has now reached 18~23%. This discrepancy is due to the fact that Samsung maintains a rather aggressive approach for pricing. Regarding 1Q23, TrendForce has revised the QoQ decline in the overall ASP from 5~10% to 15~20% provided that Samsung continues to be this competitive. TrendForce is also not ruling out the possibility that prices could drop by more than 20% for some types of DRAM products.
As for spot market, October saw spot transactions at their lowest level so far for this year. Moving into November, the ongoing decline in DRAM spot prices will unlikely ease anytime soon as China maintains its strict zero-COVID policy and enforces lockdown for local outbreaks. Furthermore, the major DRAM suppliers have made substantial price concessions in their contract negotiations, thereby creating downward pressure on spot prices as well. TrendForce has observed that the average spot price of the mainstream 1Gb DDR4 chips has been falling rapidly since October 24 with the daily decline exceeding 1%.
Until November 9, the sequential drop in the average spot price of 1Gb DDR4 chips has reached 8.36%. At the same time, spot prices of server DRAM modules have now fallen below the lowest point in the previous cyclical downturn and arrived around US$70. This indicates that there is a considerable room for a further drop in contract prices in 1Q23. Regarding weekly change in the spot price trend of the mainstream chips (i.e., DDR4 1Gx8 2666MT/s), the average spot price slid by 2.30% from US$ 2.222 last week to US$2.171 this week.
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According to a Financial Times report on October 24, 2022, as the U.S. Department of Commerce moves to restrict U.S. personnel from supporting semiconductor manufacturing “facilities” located in China to develop or produce chips without Department approval, Yangtze Memory Technologies Co., Ltd. (YMTC) has taken steps to avoid violating the ban and allowed a number of core employees with U.S. citizenship to resign.
YMTC is a domestic NAND flash memory chip manufacturer in China. In 2018, it only possessed the ability to produce 32-layer MLC 64Gb products. At that time, mainstream products offered by international manufacturers were 92-layer/96-layer TLC 256Gb/512Gb. Since then, YMTC has continued to catch up in terms of technology. By 2020, it had the capacity to mass-produce 128-layer TLC 512Gb products. The company’s new X3-9070 product, released in 3Q22, is estimated to have 232 stacked layers, equaling major international manufacturers if only in the amount of layers.
U.S. personnel played a key role in the process of YMTC’s continuous technological breakthroughs including Simon Yang, CEO since 2016. On the eve of the latest U.S. sanctions, Simon Yang resigned as CEO to become managing director. After the ban came into effect, a number of core personnel of U.S. nationality who assisted in the development of process technology resigned in succession. As sanctions continue to roil, technological development at YMTC may be delayed as a result.
Under the influence of the U.S. ban, YMTC not only faces brain drain, but will also experience difficulties expanding mass production of mainstream products and next-generation products. Since the U.S. Department of Commerce not only placed restrictions on equipment utilized to produce 128-layer (or more) NAND flash memory chips, but also maintains a “presumption of refusal” when reviewing the export of such equipment to China, YMTC may be unable to obtain sufficient equipment to produce next-generation 232-layer products or expand the production of mainstream 128-layer products.
As international NAND flash memory chip manufacturers continue to mass-produce products with more than 200 layers and move towards 300+ layers, if YMTC cannot manufacture products over 128 layers because the company continues to be limited by talent and equipment restrictions, the technological divide between YMTC and major international manufacturers will widen again and its recent efforts to keep up with technology will also come to nothing.
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