Oversupply in the NAND flash market is causing downward price pressure on client solid-state drives (SSDs), which, in turn, is driving up demand for SSDs, according to DRAMeXchange, a division of TrendForce. The market research firm expects the SSD adoption rate in the notebook market will exceed 50 percent in 2018 with PCIe SSDs gradually replacing the SATA III mainstream products.
Micron expects that four out of every five client devices (PCs, laptops, etc.) will be using SSDs by 2021, said Sumit Sadana, Micron Technology’s chief business officer, during an investor event in May. “And the average capacities on these will more than double by that time. So [there’s a] tremendous amount of expectation for SSDs on the client devices as well.”
Contract prices of mainstream client SSDs for PC OEMs are forecast to fall in the second quarter (Q2) of 2018 as most SSD suppliers lower the prices of their new 64-layer and 72-layer 3D SSDs. Average contract prices of SATA client SSDs are expected to fall by 6 percent to 11 percent quarter over quarter (QoQ) while PCIe SSD prices are forecast to fall by 3 percent to 10 percent QoQ, according to DRAMeXchange.
As the price gap closes between PCIe and SATA III SSDs, together with PCIe SSD’s edge in read/write performance, DRAMeXchange analysts expect major PC OEMs and module makers “to actively increase the PCIe SSD adoption rate in their products.”
However, DRAMeXchange said the average contract price of PCIe products “is still about 10 percent higher compared with that of the SATA III products during Q2 2018.” But this will narrow during the year as prices fall for client SSDs in general and as new entry- and mid-level controller chips for PCIe SSDs are released, said DRAMeXchange.
The average contract prices for enterprise SSDs are expected to fall in Q2 2018 by 10 percent or more due to aggressive price strategies by suppliers and pressure to consume production capacity, said Alan Chen, research director at DRAMeXchange, in a statement.
Demand for enterprise SSDs is expected to rebound significantly in Q2 compared to Q1, driven by growing demand in data centers, artificial intelligence, big data, 5G and edge computing. DRAMeXchange predicts shipments for enterprise SSDs to reach 30 million units in 2018, up from less than 20 million units in 2016.
At the same time, some enterprise SSD suppliers have implemented aggressive price strategies to win more orders and market share. The adoption of the newest 64- and 72-layer 3D NAND is the main reason why these suppliers have been able to “implement the price war strategy,” according to DRAMeXchange.
Key suppliers including Intel, Samsung, Micron, Toshiba and SK Hynix are already testing their 64-layer and 72-layer 3D SSD products with key clients, while some have entered into mass production, increasing market competition, Chen said. He doesn’t expect any noticeable shipments of 3D QLC SSDs until the first half of 2019, although some suppliers plan to launch product in 2018.
However, the third quarter may bring some changes in the market. Chen believes there is a chance of a slight undersupply in the NAND flash market in Q3 driven by demand for enterprise SSDs, client SSDs and smartphones.
NAND demand continues to be strongly driven by client SSDs, and the value propositions of SSDs in the enterprise and data center space, said Sanjay Mehrotra, president and CEO of Micron, at May’s investor event. He forecasts a 40 percent to 45 percent compound annual growth rate from 2017 to 2021 for demand growth.
Mehrotra also noted that demand for NAND flash is becoming more diversified and distributed. “Demand is growing fast over the years due to the data economy as well as applications, such as artificial intelligence, which are just emerging. And in terms of the applications, we are needing more and more memory and that's resulting in greater value for memory and storage.”
As the industry moves into the second half of the year – the busy season for most component manufacturers -- NAND flash prices are expected to stabilize. NAND flash suppliers have been cutting prices significantly on standard and high-density categories (e.g. 256GB SSDs, 128/256GB UFS) to help stimulate bit demand growth, said DRAMeXchange.
OEM demand for NAND flash had been constrained by surging prices for almost one year, so the latest development in price trend will spur OEMs in the PC and smartphone markets to upgrade the storage specifications of their upcoming products. In turn, the demand in the NAND flash market will return to a state of healthy growth, said DRAMeXchange.
Enterprise SSD achieved high growth in shipments and density despite the rising price for NAND flash during last year, said Myung-young Lee, executive vice president and CFO, SK Hynix, during an earnings call in April. “Growing production of 72-layer and 64-layer 3D NAND products this year, lead to the launch and increased adoption of high-density SSDs. Thus the portion of enterprise SSD will increase to nearly half of all NAND demand for SSD,” Lee added.
Lee also noted that “client SSD content per box is expected to grow as more supply growth with 3D NAND production, which will lead to NAND pricing stabilization.”