NAND & DRAM QUARTERLY MARKET MONITOR - Q2 2020


COVID-19 has considerably changed the DRAM & NAND industry

MARKET DYNAMICS:

  • NAND - Q1 2020:
    •  Market conditions continued to improve due to robust demand and constrained supply.
    •  Profitability for the NAND vendors improved in Q1-20, with industry margins turning positive.
    •  Capex will be down in 2020, despite early ramp spend from YMTC.
    •  The market outlook for early 2020 is favorable; significant uncertainty for H2 2020

  • DRAM – Q1 2020
    •  COVID-19 is having a mixed impact on DRAM demand.
    •  DRAM production growth will be negatively impacted by COVID-19.
    •  Revenue outlook for 2020 has been reduced 3% due to lower prices and shipments.
    •  Yole Développement still anticipates a strong recovery in 2021 and 2022.

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MARKET OUTLOOK
Capex: current forecast assumes a much steeper 2020 capex drop-off

Prior to the COVID-19 outbreak expectations were for combined DRAM and NAND capex of US$38.8 billion in 2020, down 15% year-over-year, including both WFE and infrastructure spend. This decrease was a result of the memory market downturn that plagued 2019—and much of 2018 for NAND—as well as the timing of infrastructure build outs and technology transitions.
“The current forecast assumes a much steeper 2020 capex drop-off, with combined DRAM and NAND capex of US$33.8 billion, down 26% from 2019 and 13% lower than the prior outlook”, asserts Mike Howard, VP of DRAM and Memory Research, part of the Semiconductor & Software division at Yole Développement (Yole). “It is expected that the memory suppliers will be more cautious with investments this year due to the uncertainty around second half demand and longer-term economic ramifications. The memory suppliers are likely to err on the side of caution and push spend into 2021 or potentially further depending on market conditions.”

COVID-19: an impact almost immediately felt by the memory suppliers

Indeed, Yole’s analysts point out the shift in first half bit shipments for both market segments, DRAM and NAND. The widespread work- and learn-from-home transition has provided a near-term boost to the memory suppliers, leading to first half memory bit shipments higher than previously anticipated. Shipment growth has been led by strong server and PC demand and customer buy-aheads due to supply chain concerns, which have helped offset initial COVID-related weakness in the smartphone and consumer markets.
“Looking ahead to the rest of the year, although datacenter demand is expected to remain resilient, we anticipate continued weakness in the smartphone and consumer markets and softening PC demand after the initial surge from the first half wanes”, explains Walt Coon, VP of NAND and Memory Research, part of the Semiconductor & Software division at Yole.
Demand for traditional enterprise servers is also at risk, as economic uncertainty may lead to more conservative IT spend. As a result, second half 2020 bit shipment expectations have been lowered for both DRAM and NAND.

The impact to NAND bit shipments is not expected to be as significant as DRAM for a several reasons.
Walt Coon from Yole: “Prior to the outbreak, 2020 NAND bit growth was already expected to be constrained, with the market just emerging from a major downturn and supply impacts from previous capex cuts taking hold.”
Additionally, NAND has the continued benefit of the HDD-to-SSD replacement cycle in PC’s, with the current PC demand surge coming from corporate buyers who overwhelmingly use SSD-based storage along with Chromebooks on the education side using NAND-based storage. Finally, the introduction of new gaming consoles later this year, which are shifting from HDD to high density SSD-based storage solutions, will provide a significant boost to bit demand in the second half.
Mike Howard from Yole: “For the full year, DRAM bit growth (2020 vs. 2019) has been lowered from 17% in the prior forecast to 15%, while NAND bit growth has been lowered from 30% to 29%.”

WHAT’S NEXT?
Consequences of the covid-19


Consequences of the covid-19 outbreak Effects from the COVID-19 pandemic on the memory markets have been immediate and dramatic. According to Yole, they are expected to continue impacting the memory markets into the foreseeable future. Memory suppliers will so respond proactively and with caution given the uncertainty in the markets to ensure the long-term health of the memory industry. In this context, lot of questions are pending and Yole’s memory analysts investigate to deliver detailed updates all year long within the NAND Quarterly Market Monitor and the DRAM Quarterly Market Monitor.

Yole’s Memory Quarterly Market Monitors, NAND and DRAM will be published every beginning of June (Q2), September (Q3) and December (Q4). The aim of Yole’s team is to give a closer look at the main markets and players.
Yole’s analysts invite you to follow our memory activities on i-Micronews, especially during this complex period due to the impact of Covid-19 and discover the memory reports collection including: Status of the Memory Industry, Emerging Non-Volatile Memory and more.

Stay tuned to i-Micronews to get further info. about our memory activities!


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