Memory Makers Slash Production In Rare Desperate Bid To Prevent Prices From Freefalling
As prices for PC memory kits and solid state drives (SSDs) continue to fall, NAND flash and memory chip makers are initiating what TrendForce has deemed a "rare production reduction." These are significant scale backs—Micron last month announced a "nearly 50 percent wafer fab equipment capex cut" compared to last year, while Kioxia has followed suit by saying it will reduce NAND flash capacity utilization at its fabs by 30 percent.
The good news for consumers is that it could take some time for this to be felt in the market place. Last week we wrote about DDR5 and DDR4 memory being headed for big price drops in the near future, based on TrendForce's forecast, and shortly before that we reported on plummeting SSD prices as well.
It's all for the same general reason—an oversupply of chips (DRAM and NAND flash, respectively). What led to the oversupplies is a little more nuanced.
"Memory pricing began to decline from 4Q21 due to weakening demand for certain consumer electronics. Coupled with the impact of rising inflation, the Russian-Ukrainian war, and pandemic policies, demand in peak season was weak, resulting in inventory pressure that has extended from the buyer side to manufacturers," TrendForce explains.
On the supplier side, the market situation for NAND flash is even more severe than DRAM. Suppliers are essentially selling wafers at cost, and could soon be selling at a loss if the situation doesn't improve in a hurry. Meanwhile, DRAM wafers are still being sold for a profit, and so it remains to be seen if the planned production reduction will be as steep as it is for NAND flash memory chips.
"It is imperative to reduce bit supply in the NAND flash field due to the large number of competitors and the fact that manufacturers have yet to encroach on the physical limits of manufacturing," TrendForce states.
That said, the market research firm says both DRAM and NAND flash will be "greatly oversupplied" throughout all of next year, and that the pressure to reduce production will "continue to accelerate" in the first half of 2023. How successful it ends up being on the supplier side depends in part on whether other chip makers join Micron and Kioxia in scaling back production.
From our vantage point, we don't see any need to panic-buy PC memory or SSD storage. As we've highlighted recently, there are deals to be had on DDR4, DDR5, and SSDs, and even better pricing likely on the horizon, especially as Black Friday and Cyber Monday deals come into view.