COVID-19 has upended just about every economic sector. However, some chipmakers have recently reported strong second quarter earnings despite the pandemic’s impact, including AMD and Qualcomm.
Even with such successes, analysis released Thursday from TrendForce based in Taiwan and China said the NAND Flash memory market has begun to “weaken rapidly” in the third quarter with a general decline in contract prices.
TrendForce concluded that NAND Flash average sales prices will decline by 10% in the third quarter due to excess inventory. The oversupply will intensify in the fourth quarter, further worsening the decline in prices, analysts said. Consumers may love to hear the forecast, but suppliers will have a different take.
There is an oversupply of NAND Flash products because suppliers built up inventory due to the economic fallout from the pandemic. “Since an excessive level of inventory has been carried over to this quarter, contract prices have inevitably turned downward,” the analysts said in a press release.
While the oversupply in NAND Flash continues, it will contribute to a widening decline in wafer prices, TrendForce added. Wafer contract prices were already on a flat-to-slightly-downward trend from April to June.
TrendForce also found that the largest memory design and manufacturing company in China, YMTC, is building a second fab in Wuhan and increasing production. That company’s 256 GB memory card, used in cameras and other gear, is priced “far lower than contract prices…in turn widening the decline in contract prices and exacerbating the oversupply situation in the market.”
TrendForce said the 10% NAND Flash price decline will occur despite the traditional peak season for electronics sales and the expected fall release of Apple’s new iPhones.
The NAND Flash price decline news arrived on the same day that the U.S. Commerce Department reported a decline in the nation’s gross domestic product of 32.9% on an annual basis in the second quarter, equal to a 9.5% drop when compared to second quarter 2019. Both figures were the biggest drop on record.
On a more positive note, VLSI Research reported Wednesday that overall semiconductor sales surged by 18% the week of July 20, while DRAM was on a strong upward trajectory since hitting bottom earlier in 2020. “Logic [chip] sales are picking up steam again,” said VLSI analyst Dan Hutcheson.
In May, the World Semiconductor Trade Statistics organization forecast the global semiconductor market would reach $426 billion in 2020, reflecting an increase from memory chips of15% with logic chips up 2.9%. In late 2018, the market was nearly $470 billion before declining through 2019 to about $410 billion.
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