Over the past few quarters, the storage market has experienced rollercoaster-like fluctuations, especially in the post-pandemic era, where consumer interest in electronics has waned, leading to dynamic changes in the overall market and a historical low in demand.

To address this situation, manufacturers have resorted to price cuts to correct inventory levels, and after their efforts, the storage market has finally regained an upward trajectory.

However, the positive momentum in the storage industry did not last long. Recently, unfavorable news has once again surfaced, plunging storage prices into turmoil once more. This continued volatility has not only left manufacturers anxious but also cast uncertainty over the future of the storage market for consumers and the entire electronics industry.

01

Price Trend Analysis by Storage Category

In the world of storage products, price fluctuations often reflect dynamic changes in the market and industry trends. The table below showcases price data for different product categories across various time periods, reflecting the price movements in the storage market over recent months.

As evident from the chart, the price trends for DDR, SSD, LPDDR, and eMMC product categories all exhibit a downward trajectory during the observation period.

For DDR products, whether DDR4 16Gb 3200 or DDR4 8Gb 3200, prices have continued to decline gradually from July 30 to October 8. This may be attributed to continuous advancements in storage technology and the introduction of new, higher-performance products, putting pressure on older DDR4 products. Meanwhile, market demand may not have grown significantly, leading to an oversupply situation and gradually declining prices.

Prices for OEM SSD 256GB SATA and 512GB SATA have also been on a continuous decline. This is primarily due to the gradual reduction in SSD production costs and fierce market competition, where manufacturers continually lower prices to compete for market share.

Similarly, prices for LPDDR and eMMC products have also shown a downward trend. The slowdown in the growth of mobile device markets such as smartphones has reduced demand for LPDDR. Meanwhile, with the emergence of more advanced storage technologies, demand for eMMC has decreased. The popularity of higher-performance storage technologies like UFS has gradually eroded eMMC's market share.

02

Recent Changes in Storage Prices

Specifically, in the last two months (September and October), contract prices for DRAM and NAND have seen significant declines due to subdued demand for PCs and consumer electronics.

In September, the price declines for DRAM and NAND products intensified. According to DRAMeXchange, the contract price of DDR4 8Gb 1Gx8 at the end of September fell by 17.07% month-on-month from the end of August to $1.7. DRAM prices had been steadily rising since October last year but fell by 2.38% in August, marking the first decline in DRAM quotes.

Meanwhile, due to weak demand and excess inventory, TLC NAND flash wafer prices also declined, leading to price drops for MLC and SLC wafers as well. For instance, the contract price of 128Gb 16Gx8 MLC (primarily used in flash memory products like memory cards and USB drives) fell by 11.44% to $4.34 in September, despite NAND prices remaining stable for nearly half a year.

Trend Force also mentioned that inventories of DDR4 products are significantly higher than the latest DDR5, which is why DDR5 memory prices have remained unaffected for the time being.

In October, DRAM and NAND flash prices continued to fluctuate. According to the latest DRAM spot price trend report by TrendForce, spot market trading volume in the DRAM segment continued to decline during the National Day Golden Week, with no signs of a rebound before the end of the year. On the NAND Flash side, weak buyer sentiment further exacerbated market oversupply, as detailed below:

From October 2 to October 8, spot market trading volume for DRAM continued to decline, coupled with some module factories actively destocking, driving further spot price declines. The spot market supply-demand landscape remained unchanged, with no signs of a rebound before year-end. The average spot price for mainstream chips (DDR4 1Gx8 2666MT/s) fell by 0.26% from $1.934 in the previous week to $1.929 in the current week.

From October 2 to October 8, buyer sentiment towards NAND flash inventory replenishment did not improve. Some suppliers significantly reduced prices during the week, but overall market sales pressure remained unalleviated, and the situation did not improve. Weak buyer sentiment exacerbated market oversupply, with the spot price of 512Gb TLC Wafers falling by 0.58% to $2.595 during the week.

03

How Are Storage Vendors Responding?

NAND Vendors Reduce Production and Shift to HBM Production

Due to lower-than-expected demand from the IT industry and declining 3D NAND memory prices, major flash memory manufacturers are considering adjusting production volumes and reducing investments in non-volatile memory. Instead, they may increase investments in DRAM production as demand for HBM memory in the AI industry is setting new records.

Currently, all major 3D NAND manufacturers (Kioxia, Micron, Samsung, and SK Hynix) are considering reducing non-volatile memory production and investments in expanding additional flash capacity. If they do so, this could stabilize 3D NAND prices and potentially lower DRAM prices, at least in the short to medium term.

Given the current market conditions, companies like Samsung and SK Hynix are focusing on DRAM, where demand is stronger. They are exploring the possibility of converting some NAND production lines to focus on DRAM and HBM, including Samsung's potential conversion of its P4 line and SK Hynix's plans to revamp its Cheongju M14, M15X, and M16 factories.

DRAM Vendors Shift Capacity to Expand DDR5 Production

Recently, DRAM vendor Nanya Technology stated that third-quarter sales decreased by 20%, leading to unimproved inventory levels. However, the company plans to actively shift 15% of its capacity to DDR5 in the fourth quarter. DDR5 product contributions are expected to increase month-over-month starting in December this year.

Nanya Technology explained that the quarterly decrease in shipments in the third quarter was primarily due to a regional economic downturn and reduced demand. While demand remained somewhat stable in markets like the US and Japan, it was significantly weaker in China and Europe. Market demand in Taiwan was also affected by the decline in the Chinese mainland market.

Therefore, Nanya Technology's primary operational goal at this stage is to introduce new processes to the market and actively launch high-demand, high-growth new products.

SSD Vendors Initiate Price Reduction Strategies

Recently, Kingston, the world's largest storage module vendor, has initiated a price reduction strategy, starting with a clearance sale of mid-to-low-end products to reduce inventory.

Semiconductor analyst Lu Xingzhi noted that inventory levels for Taiwanese storage module vendors generally exceed 11 months. Once traditional DRAM prices decline, recognizing inventory losses will become the norm.

Lu Xingzhi stated that current storage market inventories are bloated, even leading storage module leader Kingston to struggle to sustain operations for more than a month. It has chosen to discount and promote a stack of unsold mid-to-low-end consumer storage products. He predicts that other vendors will follow suit, particularly attention should be paid to the movements of ADATA, Transcend, and Phison.

In addition to Kingston, market sources indicate that Samsung's portable solid-state drives (SSDs) have also seen significant price cuts. For instance, the price of Samsung's 2TB portable SSD T9, which previously hovered around $1600, has recently dropped by approximately $300 to nearly $1300. The price of Samsung's 2TB portable SSD T7 has also declined, falling below $1000 from its peak of up to $1600.

04

What Primarily Influences the Fluctuations in Storage Prices?

As a barometer of the semiconductor industry, the performance of the storage sector is closely tied to industry demand. Changes on both the supply and demand sides can impact the trend of the storage industry. The primary factors influencing storage price fluctuations can also be attributed to these two aspects.

The significant recovery of the storage industry in the first half of the year can be attributed to two main reasons.

From the demand side, the surge in artificial intelligence and the gradual recovery of the consumer electronics industry have contributed to the initial rebound of the storage market.

For instance, the widespread adoption of technologies like large language models driven by AI necessitates massive data storage and processing. Furthermore, after a prolonged downturn, the consumer electronics industry has entered a gradual recovery phase, stimulating growth in the storage industry and prompting some manufacturers to step up inventory replenishment efforts.

From the supply side, the reduction in production by storage vendors and the shift of capacity towards high value-added products have also contributed to a healthier storage market.

For example, during the previous market downturn, storage chip vendors proactively reduced production to adjust supply and demand dynamics. After a period of production cuts, market supply gradually decreased, alleviating supply-demand imbalances and laying the groundwork for price recovery and industry revitalization. Additionally, vendors shifted some capacity towards high value-added products like high-end DDR5 memory and solid-state drives. These products offer enhanced performance and profit margins, meeting market demand for premium storage solutions while boosting vendors' profitability.

However, the industry has once again faced headwinds, primarily influenced by supply and demand factors.

From the demand side, economic uncertainties, technological advancements, and the slower-than-expected recovery of the consumer electronics industry could potentially disrupt the fragile stability regained in the storage market.

For instance, economic uncertainties may dampen consumer and corporate confidence and spending, leading to reduced demand for storage products. Moreover, uncertainties surrounding technological advancements and the emergence of alternative solutions could affect storage industry demand. Additionally, the slower-than-expected recovery of the consumer electronics industry has once again cast a shadow over the storage market.

From the supply side, rapid capacity restoration and intense industry competition could easily plunge the market back into turmoil.

For instance, vendors may gradually restore production capacity based on anticipated growth in market demand during the initial stages of industry recovery. However, if capacity restoration occurs too quickly, outpacing demand growth, it could once again lead to excess supply and declining prices. Furthermore, the high profits in the storage industry have attracted new competitors, and vicious competition like order-snatching and price undercutting among vendors could put pressure on existing players' market shares and pricing strategies.

05

Future Outlook for Storage Prices

In the short term, price pressures in the storage market are expected to persist, with only HBM prices in the DRAM market expected to rise month-on-month in Q4. According to TrendForce data, average prices for commodity DRAM are projected to increase by 0% to 5% quarter-over-quarter in Q4 2023. However, as HBM's share in the DRAM market grows, the average price of all DRAM products, including HBM, is projected to rise by 8% to 13% quarter-over-quarter.

While commodity DRAM prices increased by 8% to 13% in Q3, they are expected to stagnate in Q4 due to slower consumer demand amid economic recession and increased supply from Chinese memory manufacturers. Although storage manufacturers' expanded HBM production will lead to a decrease in commodity memory supply, acting as a factor driving price increases, it may not be sufficient to offset weak demand. TrendForce forecasts a 5% to 10% decline in contract prices for Q4. Additionally, TrendForce predicts that LPDDR5X DRAM prices will remain stable due to their relatively appropriate inventory levels.

In the long run, the market size of the data storage industry continues to expand, with market demand growing steadily. Fueled by the proliferation and application of technologies like digitization, cloud computing, big data, and artificial intelligence, data storage demand is consistently on the rise. SSDs are gradually replacing traditional hard disk drives (HDDs) as the mainstream, surpassing HDDs in terms of performance, efficiency, energy conservation, and reliability. In terms of pricing, SSDs are projected to become more cost-effective than HDDs by around 2026. Furthermore, the development of new technologies such as all-flash storage, DDR5, DNA storage, and holographic storage will usher in new growth points for the data storage industry.

In summary, while the storage market faces short-term challenges in terms of declining prices and fluctuating demand, long-term technological innovation, sustained market demand growth, and industry competition will collectively shape a more diversified and rapidly developing market.