The NAND Flash Market Is Rebounding Faster Than the DRAM Market

While both NAND and DRAM are seeing demand and pricing improve following a recent downturn, comments from memory and chip equipment makers make it clear that the NAND markets looks stronger in the near-term.
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Earnings season has yielded fresh reasons to think that 2020 will be a better year for memory makers than 2019. But it has also provided additional signs that the NAND flash memory market is rebounding more quickly than the DRAM market.

On its Q4 earnings call this week, Samsung, the world’s biggest DRAM and NAND maker, forecast (as rival Micron did in December) that DRAM industry bit demand would grow by a mid-teens percentage this year. By contrast, Samsung forecast that NAND bit demand is likely to grow by a high-20s percentage (that’s similar to Micron’s outlook for high-20s to low-30s growth). 

For both DRAM and NAND, Samsung expects its 2020 bit supply growth to be similar to industry demand growth.

Samsung also reported that its DRAM average selling price (ASP) fell by a high-single digit percentage sequentially in Q4 (there are some recent signs suggesting that DRAM prices could be up a bit in Q1), and that its NAND ASP rose by a mid-single digit percentage. And though Samsung joined Micron in striking an upbeat tone about 2020 server and graphics DRAM demand -- strong cloud capex and new game console launches are poised to help -- the company said it’s too early to declare that the DRAM market has entered into “a definite demand upcycle.”

“Whether the current demand expansion trend will continue until the second half of this year, that is, I think, a question that needs further monitoring,” an exec said.

When it came to NAND, Samsung’s comments were more unequivocally positive: The company pointed out that early-2019 NAND price declines had boosted demand, and forecast that prices would add to their Q4 gains in Q1 amid strong demand from server and smartphone clients. The company also noted that NAND margins remain lower than DRAM margins, something that it thinks will help keep NAND’s supply/demand balance favorable.

For its part, fellow Korean memory maker SK Hynix forecast on its Q4 call that DRAM bit demand will grow about 20% this year, and that NAND bit demand will grow by a low-30s percentage. Hynix also said that has begun seeing mobile DRAM contract price increases, and that it expects (with major DRAM capex cuts producing a more favorable supply/demand balance) DRAM ASPs to rise over the course of 2020.

At the same time, Hynix forecast that DRAM demand would be relatively mild in the first half of the year amid seasonal weakness in mobile demand. And like Samsung and Micron, the company struck a cautious tone about 2020 PC DRAM demand.

NAND and hard drive maker Western Digital issued above-consensus March quarter sales guidance on Thursday, and mentioned on its call that it’s seeing “pockets of [supply] tightness” for NAND products as demand continues growing. And notably, Western said it expects NAND bit demand “will be in the 35%-plus range this year,” with supply growth in the low-30s range.

A day before Western held its call, chip equipment maker Lam Research said that it expects wafer fab equipment (WFE) spending among memory makers (down sharply in 2019) to rise in 2020, with NAND leading the way.

Lam, which like other equipment makers is benefiting from strong orders from Taiwan Semiconductor and Intel, also reiterated that it’s seeing “early signs of improvement” in NAND equipment spending, and suggested it expects “a strong uptick in NAND spending” before the year is over. But with regards to DRAM spending, Lam indicated that it doesn’t expect a marked change “at least until much later in the year."