The sun rises on the DRAM & NAND landscape – Quarterly Market Monitor

The COVID-19 pandemic and associated supply chain issues have dramatically impacted the semiconductor industry over the past ~18 months, and the memory markets have been no exception. Elevated uncertainty, volatility, shifting demand, and supply chain issues led to mixed results in 2020. These same challenges have persisted this year, in addition to a worsening shortage of key semiconductor components. Despite these obstacles, both the DRAM and NAND markets have fared well through the first half of 2021 and are poised for strong performance through the rest of the year.

The NAND market continues evolving and the industry faces many important questions, including: When will the NAND market shift from oversupply to undersupply, and vice-versa? How will supplier profitability be impacted? How does the price elasticity of demand factor into the outlook? What are the limits of 3D-NAND stacking? How will NAND suppliers continue to scale as 3D stacking’s limits approach?What is the status of YMTC’s ramp up? How will its emergence impact the market?..

From the DRAM side, Yole’s analysts also identify lot of issues: Will the three primary DRAM suppliers – Samsung, SK Hynix, and Micron – continue to manage supply and drive industry revenue to even higher levels? Will China’s entrance in the DRAM market disrupt the current market balance or will the current US administration hinder China’s DRAM dreams? Will DRAM manufacturing’s enormous technical challenges and the lack of access to DRAM intellectual property prove too difficult for China to overcome? Etc…

The market research & strategy consulting company, Yole Développement (Yole) unveils the DRAM and NAND Quarterly Market Monitors for Q3 2021.

MEGATRENDS ARE PUSHING MORE DRAM INTO PRODUCTS

Q2-21 was a fantastic quarter for the DRAM market. Yole saw strong demand from most segments, particularly PC and Server segments. Revenue for the quarter was up 23% to $24 billion – making it the third highest quarter ever for the DRAM market in terms of revenue. The real driver behind the surge in revenue was a very strong pricing environment. Prices for the quarter jumped 18% to just under 50 cents per Gb. Shipments were up 5% on the quarter, to over 48 exabits, as suppliers drained their inventories to exceptionally low levels. 

Looking forward to the second half of 2021 Yole is factoring in a bit more risk for the DRAM market than in the first half of 2021.

Mike Howard, VP of DRAM and Memory Research, part of the Semiconductor, Memory & Computing division at Yole, comments: “While we expect Q3 prices to be up 8%, we are concerned that continued growth in customer inventories (with PC over 10 weeks – up a few weeks compared to Q2-21, Server at 8-10 weeks – also up a few weeks since Q2-21 with hyperscaler nearer the high end of the range), coupled with supply chain challenges limiting PC and server sell-through, could lead to downward pressure on prices over the next few quarters. As such, we are now forecasting prices to be rather flat over the next few quarters although normal seasonality is expected to push Q1-22 prices down mid-single digits.”

The potential pricing turbulence over the next three quarters is not expected to result in a prolonged decline in DRAM prices and revenues for the following reasons:

  • Fundamental demand, driven by server and a steadily recovering mobile market, is expected to remain strong through 2022
  • Production growth in 2022 is expected to be just under 20% year-on-year. This could come in even lower if deteriorating market conditions over the next few quarters prompt suppliers to lower production growth plans for 2H-2022 (which they will be able to do until late 2021/early 2022).
  • Suppliers currently have exceptionally low inventories at approximately two weeks for the entire industry. The excess inventory currently held by server and PC customers would equate to approximately four weeks of supplier inventory, meaning if suppliers were to build their inventory to approximately six weeks, then they could absorb any falloff in demand due to PC and server customers working solely out of inventory.  

Looking longer-term, we remain very positive about the prospects for the DRAM industry, asserts Mike Howard from Yole. The three main suppliers are very sensitive to profitability and therefore act rationally. Further, there are not any glowering external threats to the industry. Yole does not anticipate China making meaningful inroads into DRAM over the next five years, there are not any technologies that are positioned to significantly disrupt DRAM in the next five years and given that the global economy is powered by compute, robust DRAM demand will likely persist for the foreseeable future. All these things will combine to result in an industry that, although volatile, will have very healthy long-term margins and revenues.

MEGATRENDS AND HDD REPLACEMENT WILL PUSH NAND TO NEW HEIGHTS

After a difficult finish for the NAND industry in 2020, market prices bottomed in early 2021 before conditions began to improve midway through Q1-21.

Walt Coon, VP of NAND and Memory Research, part of the Semiconductor, Memory & Computing division at Yole explains: “The NAND recovery was in full steam by the time we entered the second quarter, leading to tremendous Q2-21 results for the market – revenue was up almost 10% QoQ, reaching $15.9 billion, as both shipments and ASPs increased about 5%, to 141 exabytes and $0.113 per GB, respectively.”

The improved pricing environment was broad-based, and led by strong demand from the data center, continued strength in the PC market due to work- and learn-from-home transitions, solid demand from mobile (boosted by 5G), and recovering demand from traditional enterprise OEM’s.

Looking ahead to the second half, the market is poised to continue climbing. Inventory levels are lean at the suppliers and generally lean across the supply chain. Data center demand continues to outperform the broader market; PC demand remains strong, with expectations of improved enterprise PC demand replacing some softening consumer and education demand (dependent on COVID-19 progress); and mobile demand is robust with the upcoming iPhone release augmenting seasonal 2H smartphone demand. Traditional enterprise OEM demand recovery has lagged the overall market due to inventory digestion—but even this area is improving—and Yole expects increasing on-premises infrastructure spend as more corporations return to the office.

Second half market optimism has been supported by supplier commentary, with both Samsung and SK hynix increasing 2021-bit demand growth estimates in their latest earnings calls, driving our full year bit supply growth forecast up to 39%. The market research and strategy consulting company expects blended pricing to be up mid- to high-single digits in Q3 and flat to up slightly in Q4. For the full year, we expect NAND revenue to reach $70 billion, far surpassing the previous record from 2018, asserts Walt Coon from Yole.

Controller and other critical semiconductor component shortages are limiting market upside some instances, with some suppliers unable to fulfill all of their demand. This could serve as a blessing in disguise as some unmet demand is pushed into 2022 – a year when NAND market dynamics are expected to soften.

In 2022, Yole believes the market will return to quarterly price declines in the mid- to high-single digit range (which is typical for the NAND market), due to slowing demand growth, price elasticity of demand, and general pricing fatigue from the customer base. Yole’s memory analysts expect PC shipments to be down in 2022 after an amazing run over the past two years, and they would not be surprised to see a period of inventory digestion from the cloud service providers (CSPs) at some point next year after a multi-quarter run of elevated investments. And finally, improved supplier profitability exiting 2021 increases the likelihood that suppliers will be willing to pass on cost declines to their customers.

Bit demand in 2022 is only expected to increase by about 30%, which coincides with muted supply growth next year in the low 30% range due some very challenging 3D process migrations from several key suppliers. Analysts believe limited technology-driven supply growth limits market downside next year because suppliers will likely reduce planned wafer additions if market conditions begin to deteriorate. Yole anticipates another record year for the industry in 2022, with NAND revenue projected to reach $80 billion.

NAND, DRAM… WHAT COULD WE EXPECT?

Despite continued supply chain challenges and pandemic-related uncertainties, both the DRAM and NAND markets have enjoyed robust performance in the first half of the year, and expectations are for continued revenue expansion through the second half for both memory technologies. Looking ahead to 2022, there are uncertainties surrounding market demand, but Yole’s memory team believes but that low inventories and limited supply growth will likely cap market downside and lead to another year of strong revenue growth – Yole project srecord revenues for both DRAM and NAND. However, the past 18 months have reinforced the notion that nothing is a given, so the memory team will continue to actively monitor these markets to stay prepared for the changes that will come, with a readiness to expect the unexpected.

About the memory team

As VP of DRAM and Memory Research, Mike Howard is a member of the Semiconductor, Memory & Computing division, at Yole Développement (Yole).

Mike’s mission at Yole is to deliver a comprehensive understanding of the entire memory and semiconductor landscape (with special emphasis on DRAM) via market updates and Market Monitors. Mike is also deeply involved in the business development of all memory activities. Mike is based in the US.

Mike has a deep understanding of the DRAM and memory markets with a valuable combination of industry and market research experience. For the decade prior to joining Yole, Mike was the Senior Director of DRAM and Memory Research at IHS. Before IHS, Mike worked at Micron Technology where he had roles in corporate development, marketing, and engineering.

Mike earned a Master of Business Administration at The Ohio State University (United-States), a Bachelor of Science in Chemical Engineering and a Bachelor of Arts in Finance at the University of Washington (Washington, United-States).

As VP of NAND and Memory Research, Walt Coon is a member of the Semiconductor, Memory & Computing division, at Yole Développement (Yole).

Based in the US, Walt is leading the day-to-day production of both market updates and Market Monitors, with a focus on the NAND market and semiconductor industries. In addition, he is deeply involved in the business development of these activities.

Walt has significant experience within the memory & semiconductor industry. He spent 16 years at Micron Technology, managing the team responsible for competitor benchmarking, and industry supply, demand, and cost modeling. His team also supported both corporate strategy and Mergers & Acquisitions analysis. Previously, he spent time in Information Systems, developing engineering applications to support memory process and yield enhancement.

Walt Coon earned a Master of Business Administration from Boise State University (Idaho, United-States) and a Bachelor of Science in Computer Science from the University of Utah (United-States).

Simone Bertolazzi, PhD is a Senior Technology & Market analyst, Memory, at Yole Développement (Yole), working with the Semiconductor, Memory & Computing division. As member of the Yole’s memory team, he contributes on a day-to-day basis to the analysis of nonvolatile memory markets and technologies, their related materials and fabrication processes.

Previously, Simone carried out experimental research in the field of nanoscience and nanotechnology, focusing on emerging semiconducting materials and their opto-electronic device applications. He (co-) authored several papers in high-impact scientific journals and was awarded the prestigious Marie Curie Intra-European Fellowship.

Simone obtained a PhD in physics in 2015 from École Polytechnique Fédérale de Lausanne (Switzerland), where he developed novel flash memory cells based on heterostructures of two-dimensional materials and high-κ dielectrics. Simone earned a double M. A. Sc. degree from Polytechnique de Montréal (Canada) and Politecnico di Milano (Italy), graduating cum laude.

Emilie Jolivet is Director of the Semiconductor, Memory & Computing Division at Yole Développement, part of Yole Group of Companies, where her specific interests cover package & assembly, semiconductor manufacturing, memory and software & computing fields.

Based on her valuable experience in the semiconductor industry, Emilie manages the expansion of the technical and market expertise of the Semiconductor and Software Team. The team interacts daily with leading companies allowing semiconductor & software analysts to collect a large amount of data and integrate their understanding of the evolution of the market with technology breakthroughs.

In addition, Emilie’s mission focusses on the management of business relationships with semiconductor leaders and the development of market research and strategy consulting activities inside the Yole group.
Emilie Jolivet holds a Master’s degree in Applied Physics specializing in Microelectronics from INSA (Toulouse, France). After an internship in failure analysis at Freescale (France), she was an R&D engineer for seven years in the photovoltaic business where she co-authored several scientific articles. Enriched by this experience, she graduated with an MBA from IAE Lyon and then joined EV Group (Austria) as a business development manager in 3D & Advanced Packaging before joining Yole Développement in 2016.

Related reports & monitors

NAND Quarterly Market Monitor

After a difficult finish to 2020, the NAND market outlook improves in early 2021.


DRAM Quarterly Market Monitor

The DRAM rocket ship is fueled up and ready for blast off to reach 120B$ by 2022 due to limited supply coupled with resurgent demand.

Status of the Memory Industry 2021

NAND consolidation, China’s bet on two key players, the rise of the CXL interface: as the memory business narrows, the market keeps growing and is poised to exceed $200B in 2026.

Source: http://www.yole.fr

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