According to the latest research report released by TrendForce, the price of memory has been declining since the fourth quarter of 2021 due to weakening demand for certain consumer electronics products. In addition, it is also affected by other factors: rising inflation, the Russian-Ukrainian war, the epidemic policy, etc., weak demand in peak seasons, etc., so these sales pressures extend from buyers to manufacturers.
In response to the above situation, Micron announced last week that it would cut production of DRAM and NAND Flash, becoming the first major memory manufacturer to formally reduce its capacity utilization plan. Kioxia also followed Micron in announcing that it will reduce NAND Flash capacity utilization by 30% since October.
In terms of DRAM, the current contract pricing is still higher than the total production cost of each mainstream supplier. Therefore, it remains to be seen whether there will be a significant reduction in production compared to NAND Flash. In addition to mentioning the current slight decline in capacity utilization in this field, Micron is mainly emphasizing its sharp reduction in capital expenditures in 2023, and the annual growth rate of DRAM production bits next year is only about 5%. TrendForce believes that Micron believes that achieving such a conservative bit growth means that there is still room for a significant reduction in capacity utilization, and it remains to be seen how much Micron will implement subsequent production reductions.
In terms of NAND Flash, Micron originally planned to gradually increase the proportion of 232-layer products starting in the fourth quarter of 2022. However, with the implementation of the company’s decision to reduce production, it is expected that Micron’s mainstream process will still be dominated by 176-layer products in 2023, while the wafer operating rate of traditional processes will also decline. Kioxia and WDC originally planned to start migrating to 162-layer products from 4Q22, but WDC slowed capex in 2023. Under the circumstance that funds are difficult to obtain and demand visibility is poor, the proportion of 162-layer products will drop significantly, and the company’s original plan to replace mainstream 112-layer products in 2023 will not be realized.
In terms of supply and demand in the memory market in 2023, due to the conservative demand outlook, DRAM and NAND Flash are severely oversupplied in each quarter, and inventory pressure will continue to accelerate in the first half of next year.
In the DRAM field, after Micron took the lead in announcing that the DRAM production reduction plan is far below the historical level of supply-side growth, the DRAM adequacy ratio will shrink from 11.6% previously predicted by TrendForce to less than 10% in 2023, which will help ease the rapidly deteriorating inventory pressure. . However, in the future, it must rely on more suppliers to participate in the actual DRAM production reduction in order to reverse the supply-demand imbalance next year.
