Memory Prices in 3Q – Push Me, Pull Me
After Taking what is expected to be a rather large jump in prices, DRAM and NAND Flash price increases are expected to be a bit more modest in 3Q and the 2nd half. With DRAM prices up between 18% and 23% and NAND Flash prices up between 5% and 10% in 2Q, 3Q expectations look far less aggressive, but seem to be carrying a bit more risk. With component shortages on the minds of memory buyers during 1H, buyers aggressively bid for memory to build inventory safe stocks in case the shortages seen in a number of IC products shifted to memory.
With customer DRAM inventory levels higher than normal, expectations for 3Q DRAM pricing is for an increase of between 3% and 8%, a far cry from the previous quarter, but supplier inventories still remain low and demand for server memory typically increases in 3Q,, giving producers the ability to maintain or increase DRAM prices. NAND Flash is in a similar situation, with customer inventories higher and supplier inventories lower than normal, with wafer shortages and enterprise storage demand also increasing in 3Q. This has pushed up 3Q NAND Flash price expectations from earlier expectations of a 3% to 5% increase to 5% to 10% in the September quarter.
That said, all is not set for smooth sailing in the memory space as the smartphone space is now seeing a slowdown as Chinese brands lower their full year unit volume targets, lowering overall smartphone growth from 9.4% earlier to 8.5% currently. COVID-19 outbreaks in Southeast Asia and an overall slower end to the pandemic in China and India, are taking their toll on what we have noted previously as aggressive smartphone unit volume estimates and inventory levels at OEMs will have to adjust to those lower targets. Despite the higher inventory levels at smartphone and PC OEMs, demand from other memory categories (see above) should offset the demand declines from a weaker smartphone outlook in 3Q, and the balance between negative and positive forces here still lean a bit toward the positive side.
That said, it would not take much to tip the scales in another direction, should the COVID-19 outbreaks prove more difficult to control, and this is true for many other parts of the CE supply chain as we also have noted previously. While CE component sales remain high on a relative basis, as comparisons become harder, enthusiasm over the 1st half’s easy comparisons will wane a bit and the potential for declining q/q sales comparisons along with y/y comps, paints a higher risk scenario than was apparent in 1H, both for memory and the CE space in general. We don’t want to seem overly negative but we certainly feel a higher risk scenario for the 2nd half is possible, and while OEMs in Taiwan are still showing reasonably strong results, the last two months have seen m/m sales turn negative for all but two assemblers and y/y sales comps for all but one OEM turn negative in May. Short-term data but likely beginning to reflect Chinese smartphone target reductions. More to follow.
With customer DRAM inventory levels higher than normal, expectations for 3Q DRAM pricing is for an increase of between 3% and 8%, a far cry from the previous quarter, but supplier inventories still remain low and demand for server memory typically increases in 3Q,, giving producers the ability to maintain or increase DRAM prices. NAND Flash is in a similar situation, with customer inventories higher and supplier inventories lower than normal, with wafer shortages and enterprise storage demand also increasing in 3Q. This has pushed up 3Q NAND Flash price expectations from earlier expectations of a 3% to 5% increase to 5% to 10% in the September quarter.
That said, all is not set for smooth sailing in the memory space as the smartphone space is now seeing a slowdown as Chinese brands lower their full year unit volume targets, lowering overall smartphone growth from 9.4% earlier to 8.5% currently. COVID-19 outbreaks in Southeast Asia and an overall slower end to the pandemic in China and India, are taking their toll on what we have noted previously as aggressive smartphone unit volume estimates and inventory levels at OEMs will have to adjust to those lower targets. Despite the higher inventory levels at smartphone and PC OEMs, demand from other memory categories (see above) should offset the demand declines from a weaker smartphone outlook in 3Q, and the balance between negative and positive forces here still lean a bit toward the positive side.
That said, it would not take much to tip the scales in another direction, should the COVID-19 outbreaks prove more difficult to control, and this is true for many other parts of the CE supply chain as we also have noted previously. While CE component sales remain high on a relative basis, as comparisons become harder, enthusiasm over the 1st half’s easy comparisons will wane a bit and the potential for declining q/q sales comparisons along with y/y comps, paints a higher risk scenario than was apparent in 1H, both for memory and the CE space in general. We don’t want to seem overly negative but we certainly feel a higher risk scenario for the 2nd half is possible, and while OEMs in Taiwan are still showing reasonably strong results, the last two months have seen m/m sales turn negative for all but two assemblers and y/y sales comps for all but one OEM turn negative in May. Short-term data but likely beginning to reflect Chinese smartphone target reductions. More to follow.
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