Chinese module manufacturers continue to maintain high inventory demand to expand cooperation with smartphone brands.

TrendForce forecasts a significant increase of 13%-18% in NAND Flash contract prices for the second quarter, with the highest increase in enterprise-level SSDs. Despite Kioxia and Western Digital increasing their capacity utilization rates from the first quarter of this year, other suppliers' production strategies remain conservative. Compared to the first quarter, NAND flash memory procurement volume slightly decreased in the second quarter, but this did not affect the overall market momentum, which continues to be influenced by suppliers' reduced inventories and production cuts.

eMMC demand is primarily driven by Chinese smartphone brands, and due to some suppliers reducing their supply, the shipment volume of Chinese module manufacturers has increased significantly. Buyers are increasingly adopting component manufacturers' solutions to meet production needs, thereby enhancing the technological advancement of Chinese component factories and their influence on high-quality customers. This trend may increase the penetration rate of eMMC products among smartphone customers, and it is expected that due to a significant rebound in NAND Flash wafer prices, eMMC contract prices will rise by 10%-15% in the second quarter.

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The UFS market is buoyed by strong smartphone demand in India and Southeast Asia, supporting a robust order momentum for UFS in the second quarter. Chinese smartphone brands are increasing their orders for the second quarter to ensure sufficient inventory levels, thereby boosting demand. Suppliers aiming to quickly achieve break-even targets are expected to push UFS contract prices up by 10%-15% in the second quarter.

Enterprise-level SSDs benefit from the growing demand of communication service providers in North America and China, with an expected sequential increase in procurement volume in the first half of the year. Due to the low fulfillment rate of large-capacity SSD orders, suppliers continue to influence price trends, potentially forcing buyers to accept higher prices. As some buyers attempt to increase inventory levels before the peak season in 2H24, it is expected that enterprise-level SSD contract prices will rise by 20%-25% in the second quarter, which is the highest increase among all product lines.

Due to the off-season for terminal sales, client-side SSD purchase strategies are more cautious, with some PC OEMs reducing orders for 2Q24. The rapid rebound in prices may suppress the growth of orders in the second half of the year, and it is expected that the contract price increase for PC client-side SSDs in the second quarter will be lower than that for enterprise-level SSDs, at about 10%-15%. Due to the lack of stockpiling demand from downstream customers, NAND Flash wafer sales continued to decline after the Spring Festival. However, the price increase led to suppliers being unable to meet the orders of Chinese smartphone brands, causing suppliers to turn to module manufacturers. As a result, Chinese module manufacturers continue to maintain high inventory demand to expand cooperation with smartphone brands. With manufacturers eager to quickly achieve profitability targets, NAND Flash wafer contract prices continue to rise. Nevertheless, due to the sluggish retail market demand, the expected increase will be significantly lower than in the first quarter, with an expected increase of 5%-10%.Weak demand leads to a decline in DRAM and NAND flash spot prices

DRAM Spot Market

Due to lukewarm channel demand, DRAM spot prices continue to fall. In addition, the recent decline in both DDR4 and DDR5 products has become more pronounced. At the same time, spot traders who had accumulated inventory are now eager to sell off, as the overall demand outlook is not particularly optimistic. As a result, spot prices are generally weakening. The average spot price for mainstream chips (i.e., DDR4 1Gx8 2666MT/s) fell from $1.936 last week to $1.921 this week, a decrease of 0.77%.

NAND Flash Spot Market

Continuing from last week, under the influence of persistently low channel market demand, spot prices continue to decline, but the sales pressure is slightly less than that of DRAM. The transaction price for 512Gb wafers is around $3.9, which is lower than the contract price, indicating that consumer demand levels have not yet recovered. The spot price for 512Gb TLC wafers fell by 1.98% this week, to $3.764.

SK Hynix HBM accounts for double-digit DRAM sales in 2024

SK Hynix's Kwak Noh-Jung estimated at a recent shareholders' meeting that HBM will account for double-digit sales of overall DRAM in 2024, with supply remaining tight in 2025.

In response to a shareholder's question about why SK Hynix still incurred a net loss of 9 trillion won in 2023 despite the AI boom and the popularity of HBM, Kwak Noh-Jung explained that the price drop of standard-type DRAM products, which account for most of the sales amount, was the reason. Although HBM is popular, its sales amount accounted for only a single-digit percentage in 2023.In addition to the increase in HBM's share, Kwak Noh-Jung also stated that the prices of standard DRAM began to improve from the fourth quarter of 2023, leading to a comprehensive enhancement in the profitability of the memory business. Regarding NAND Flash and solid-state drives, SK Hynix has adjusted its strategic direction, shifting from focusing on market share to improving profitability, and continues to advance a high-profit product portfolio.

In the final image sensor CIS business, SK Hynix is undergoing restructuring and has no plans to exit the business. On the technical front, SK Hynix believes that HBM can be customized to meet demand, gradually moving away from its status as a commodity product. Previously, South Korean media outlet The Elec reported that SK Hynix has received a customized HBM order from Google.