Posted on September 16, 2019.

The price of NAND and DRAM began a steady price decline in 2H 2018. Throughout the first half of 2019 prices for both technologies continued to fall dramatically. Interesting product dynamics began to surface earlier this year when NVMe based NAND drives began competing on price point with more traditional 12GB SAS NAND drives. This near-cost equivalency was a boon for the enterprise seeking greater performance for an ever-increasing data workload.

Then in mid-June a production issue at a joint venture between Toshiba and Western Digital seemed to change that trend for NAND. A Yokkaichi factory campus in Japan owned by Toshiba Memory and Western Digital was struck with a power outage on June 15th. The 13-minute power outage led to the loss of 6 Exabytes of NAND wafers as announced by Western Digital. Toshiba has not officially announced the scale of their losses during this outage. The reason for the large loss was due to the ten-week cycle it takes to produce each wafer. The Yokkaichi Operations campus produces about 35% of the global NAND output in terms of revenue, according to TrendForce. Prior to the outage, NAND prices had been in a steady decline and on pace to reach a 40% reduction in price for 2019. Several factors including soft data center enterprise demand, declining NAND wafer sales for cellular devices and over production all contributed to the steep decline in NAND prices this year.

Immediately following the confirmation of this outage at Yokkaichi, analyst predicted a complete reversal in the pricing trajectory for NAND. With the loss of 15% of quarterly global NAND production, it was anticipated NAND prices would increase during the 2H of 2019. However, just six weeks since this outage NAND prices have begun to moderate after showing a brief bump in pricing. Let’s take a closer look at the dynamics that currently exist within the NAND market.

First, the outage in Yokkaichi impacted 2D NAND production. This is a very important distinction since 2D NAND is an older technology and its production is waning. Although, still used in some storage and server-based devices a loss of 3D NAND of this magnitude would have had a far more reaching impact on the overall cost structure of the NAND market.

Second, a glut of the more popular 3D NAND still exists, at least through the end of the year. Manufacturers have all adjusted their output and the stockpile of 3D NAND is gradually declining. The 2D NAND market will experience tighter inventories through the end of 2019 but this reduction in inventory will not lead to a dramatic spike in pricing.

Third, soft demand in both the enterprise and consumer market will exists in 2H of 2019. This combination of muted demand in both categories will continue to exert downward pricing pressure on the NAND market.

Finally, China is aggressively ramping up production within their own NAND facilities.  Yangtze Memory Technologies (YMTC) is scheduled to be mass producing 3D NAND products by the end of this year. YMTC’s development efforts will continue to influence the global supply of 3D NAND. YMTC will become the wildcard in the global production chain. Unbridled production of their 64 layer and soon to announce their 128-layer offering of 3D NAND could potentially keep the NAND pricing market in decline for the foreseeable future.

What does this mean for IT Directors and Managers? A price advantage currently exists for 3D based NAND drives. NVMe will actually jump to 50% of the SSD market by years end. These pricing advantages may not last. On the horizon, improved consumer demand, autonomous automobiles and a smoldering trade war between Japan and South Korea all have the potential to push the price of NAND based products upward. What is clear however is that NVMe based technology has arrived in the mainstream and will certainly be a major element in the strategy for designing low latent, high performance data infrastructures.

Trendforce has adjusted NAND price trends for the third 2019 quarter, saying the supply of 2D NAND, “will tighten up noticeably”. The availability and prices of newer 3D NAND will likely not be as impacted by the 2D shortage. 3D NAND products are still in an oversupply situation but there could be some moderation of the 3D NAND price declines due to the 2D NAND shortages.