The prices of memory chips began to decline as early as the fourth quarter of 2021 due to falling demand for certain types of electronics, and rising inflation, events in Ukraine and sanitary restrictions in China only exacerbate the situation. The largest producers will have to limit the production of DRAM- and NAND-memorials to avoid losses, with the flashback being the worst, reports the TrendForce study.
It is reported that the average contract price for memory chip plates has fallen to near cost, which in the near term is a risk to many producers. So, as early as last week, Mikron officially announced a reduction in the production of DRAM and NAND, followed by Kioxia, claiming a 30% drop in the download of the NAND output lines in October.
The contract price of DRAM is still above cost, so it remains to be seen whether there is a massive decline in production in this segment. It is known that Mikron, in addition to lowering capacity, intends to reduce production costs in 2023, and the capital cost of developing production — the annual increase in DRAM output next year will be only 5%. It is possible that the decline in production will occur in this area, although the volume is not yet known.
With regard to NAND, Microsoft had previously planned to gradually increase the share of 232 layered chips in its production from 4 quarters of 2022, but according to new plans, the mainstream is likely to dominate 176 layered products in 2023, and the chip plates produced in old technology will also be produced in smaller quantities. It appears that it intends to limit Kioxia's development along with WDC. The latter is prepared to slow down capital spending in 2023, so the company's plan to move from 112 layer chips in 2023 to more modern processes does not seem to be implemented.
It cannot be excluded that memory production will be limited to other companies, since only a decline in industry-wide production will help to correct the balance of demand and supply in 2023.
In one way or another, TrendForce expects that the "pressure" of existing stocks will continue to increase in at least one quarter of 2023; it is particularly important to jointly reduce production not only of DRAM, but also of NAND, as the number of competitors in this area is even greater; if more producers join the line load restrictions, the "storage pressure" is likely to be weakened in the second quarter of 2023, and the price drop will only fall in the second half of the year.