NAND flash contract prices to rise through 1H25, says Silicon Motion

Contract market prices for NAND flash memory will rise another 20% in the second quarter, according to Wallace Kou, president and CEO of memory device controller IC supplier Silicon Motion Technology. This upward trend is expected to persist throughout the first half of 2025.

Kou believes that despite rumors of upcoming increases in fab utilization rates by NAND flash makers, upstream manufacturers will prioritize profits and are unlikely to increase output in the near future. In addition, downstream OEM customers have reached a consensus on the consistent rise in NAND pricing.
Memory chipmakers suffered considerable losses during the previous industrial cycle. DRAM and NAND manufacturers have shown greater capital investment prudence despite experiencing the longest down cycle in history. Kou indicated that original producers intend to prioritize achieving pricing satisfaction before making significant investments or increasing production. The goal is to raise the gross profit margin to a positive level and exceed 30%.

Only a few NAND original manufacturers had positive gross profit margins in the first quarter; virtually all will make money in the second quarter, and all are likely to be profitable in the third quarter, according to Kou.

However, there has yet to be a significant rise in end-market demand, said Kou. He predicts that the moment for chipmakers to increase output will be in the second half or end of 2024.
NAND flash bit supply growth is projected to be 20% in 2024, while bit demand growth will exceed 20%, resulting in a slightly constrained supply, according to Kou.
Kou expects that the prices of DRAM memory will continue to rise. Particularly, generative AI boosts the demand for HBM and DDR5 memory. The supply of HBM is constrained by the complexity of manufacturing processes, making the chip expensive and in great demand.

DDR5 also leverages the AI trend, since AI-enabled PCs, mobile phones, and other devices will use LPDDR5. The overall supply and demand for DRAM is favorable, which could somewhat counterbalance the decline in NAND, according to Kou.

In addition, Kou noted that shipment pull-ins for data centers from North America began in March instead of the previously anticipated second half of 2024. Demand from China has also started picking up since November 2023, suggesting that the recovery of data center supply and demand as a whole is reasonably healthy, according to Kou.

Mobile phone and chip makers are developing their own large-scale language models. As the number of AI mobile phones grows, there will be opportunities to implement QLC NAND specifications, said Kou.

Kou also anticipates that the AI PC penetration rate will reach 10-15% in 2024.

Close ties with original NAND makers

Silicon Motion will work closely with numerous NAND chipmakers in 2024, with projects from original manufacturers predicted to increase by roughly 50%, Kou indicated. For example, in terms of automotive applications, the controller device supplier is working with two to three NAND original manufacturers and aims to expand its footprint in North America, China, Japan, and Europe.

Silicon Motion anticipates a rise in sales from the automotive electronics industry in 2024, followed by significant growth in 2025.

Silicon Motion’s principal products now use 12nm and 6nm manufacturing processes, down from 28nm. Between the third quarter of 2023 and 2024, three devices using 6nm technology finished their prototype development phase.

Silicon Motion has invested NT$4 billion (US$127.1 million) in a new headquarters in Hsinchu, northern Taiwan, with construction slated to be completed in June-July. The company plans to relocate its headquarters in the first quarter of 2025 to a new location that can accommodate 1,500 personnel.

© 2023 Zeon Technology