Weakness continues to impact the memory market despite areas of high demand bolstered by artificial intelligence. In the last few weeks, concerns have been centered around the memory market’s performance. Spot prices have been dropping over the previous quarter, mainly attributed to flat consumer demand, which has been prevalent throughout the year.
Electronic component excess continues to challenge numerous sectors, with memory suppliers seeing procurement professionals use excess stock to fill any backlogs that develop. There was hope that demand might rebound in the latter half of the year in preparation for seasonal sales. However, that hope has diminished in recent weeks as indicators from the Chinese market prove otherwise.
According to a recent TrendForce report, the NAND flash market has been hit with “weaker-than-expected seasonal demand.” This has contributed to a decline in wafer contract prices during Q3. TrendForce forecasts that this downturn will continue to deepen over Q4, possibly surpassing 10% by the end of the year.
Like DRAM, the only segment of the NAND flash market seeing noticeable growth is enterprise solid state drives (SSDs), utilized in AI applications. Ongoing order momentum will contribute to modest growth through Q4, rising by 5%.
TrendForce notes that “PC SSDs and UFS will see more cautious procurement strategies from buyers, as weaker-than-expected sales of end products drive buyers to adopt a conservative approach.”
This will likely lead to a decline in overall NAND flash contract prices between 3% and 8% over 4Q24. A similar trend is being seen in DRAM, in which high bandwidth memory (HBM) will see continued growth over the fourth quarter due to its use in AI applications, with the overall market experiencing flat demand or outright declines.
TrendForce attributes the coming quarter's poor performance to inflation and limited practical use cases for AI. This has “hindered any significant upgrade cycles despite manufacturers actively introducing AI-powered PCs.”
Concurrently, several major manufacturers have returned to full capacity utilization during 3Q, primarily due to process upgrades. This has caused a modest rise in overall capacity, which, while a move toward stabilization, is not enough to support price increases, with the sluggish consumer market showing no signs of improvement lately.
EETimes Asia reports that “the widening gap between spot market prices, channel prices, and OEM contract prices has further restricted suppliers’ ability to raise prices.”
Another reason the debut of AI-enabled PCs and smartphones has yet to help boost demand across the memory sector is the delayed deployment of AI applications. Smartphone and PC manufacturers have implemented supply reduction strategies throughout the year, but excess remains a crucial challenge for many.
Enterprise SSDs remain the black sheep in the foreseeable future due to their profitability, seeing higher demand from all, if not most, other products. This has caused some suppliers to increase bit shipments and pursue orders. However, this method will constrain price growth, warns EETimes. This is why the price increase over Q4 will be a small 5% rather than dramatic.
The UFS and eMMC markets have continued to experience poor demand and conservative stocking strategies from procurement professionals. Seasonal shopping seasons, including back-to-school in the U.S. and Europe alongside holidays in China, still need to reinvigorate demand. Module houses have held on to excess while others are using price-cutting strategies.
TrendForce estimates a 10–15% drop in contract wafer prices over 4Q, possibly steeper if market conditions deteriorate further.