Boom to Bust: Memory Makers Plan to Cut NAND Flash Production

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A true cyclical market, the NAND flash business goes through periods of booms and periods of busts. Following a very profitable boom year in 2018, it looks like the market is in a down swing, as an oversupply is starting to impact the bottom lines of memory makers. To stem any potential for significant losses or an outright market crash, three major manufacturers of NAND memory — Intel, Micron, and SK Hynix — have announced that they will be taking measures to address the oversupply, such as reducing flash production, cutting down wafer starts, and/or slowing down ramp ups of new fabs. Furthermore it is highly likely thr another major manufacturer, Samsung, will follow suit.

The rapid transition to high-capacity 64-layer and 96-layer 3D NAND memory devices has enabled NAND flash manufacturers to increase their NAND supply (as measured in bits) and ultimately saturate the market with loads of flash memory. Meanwhile, demand for servers in the recent months has been weaker than expected, smartphone replacement cycles are getting longer, and other drivers of NAND demand have also disappointed. As a result, NAND supply has well exceeded demand, causing prices to fall by as much as 20% across multiple categories in Q1 2019, according to TrendForce. To ensure their short-term and long-term profitability, at various points in the last couple of months the three manufacturers have all announced that they are taking actions to minimize their exposure during this latest bust.

Micron said back in March that it was carefully managing its NAND bit supply growth (to tackle oversupply at least partially) and started to decrease its total NAND wafer starts by roughly 5% by cutting its legacy nodes. The company did not indicate plans to shrink its NAND bit supply, but reducing production of memory using older process technologies will likely lower its costs.

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