MLC NAND Flash Average Contract Price Surged Up 8% to 18% in 2H April; PC: 2Q NB Growth Driven by China Market
Published Apr.28 2009, 15:24 PM (GMT+8)
MLC NAND Flash Average Contract Price Surged Up 8% to 18% in 2H April
In 2H April, the mainstream MLC NAND Flash average contract price went up about 8% to 18% reflecting the inventory replenishment demand of some system maker clients and China mobile phone market and the continuing supply controlling of NAND Flash suppliers.
The NAND Flash downstream system maker clients mostly replenish their inventory quarterly and therefore require higher procurement quantity than the memory card clients. After the decreasing of downstream system maker client inventory level in 2Q09, the inventory replenishment for the beginning of 3Q09 new products has started. Since the NAND Flash vendors has set NAND Flash downstream system clients and their strategic partners with higher supplying priority, the total supply to second-tier UFD and memory card clients has decreased. While facing low inventory level and worrying about insufficient sources for buying, the memory card makers have been more agreeing to the contract price raise.
Meanwhile, the China Home Appliance Subsidy Policy, 3G upgrade, white-brand phones, and the pre May 1st labor day inventory replenishment all making the effects of China rush orders after lunar new year and inventory replenishment sustaining. On the other hand, after the price came back close to their chip cost, the NAND Flash suppliers still keep controlling their outputs and tend not to increase 2Q09 wafer outputs in order to maintain the price stability and improve their profitability. These are two additional reasons that supported the April price keep surging.
Analyzing the spot price trend of the mainstream chip 32 Gb MLC, after the NAND Flash price has rallied quickly since 1Q09, the recent uptrend has started consolidating. This is mainly reflecting the concerns of whether the rush orders of system clients will sustain after May and how the May 1st holidays sales will perform. Currently some electronics end-product makers are expecting the short term orders to sustain until June and the NAND Flash suppliers tend to gradually increase the May contract price. If the June demand is lower than expected, they will try to stabilize the price in order to improve their profitability and give time and space to the memory card clients for them to adjust the memory card prices. Therefore the 1H May contract price of mainstream NAND Flash MLC is likely to raise another 5-10%.
2Q NB Growth Driven by China Market
Benefitting from the shipping of new projects, the NB ODMs are still optimistic toward 2Q NB (including Netbook) shipment and estimate that the QoQ shipment growth can reach 15%. Monthly speaking, the April MoM shipment is expected to drop 3% to 5% due to that increasing March shipment had elevated the base period number and the delayed shipment caused by component shortage. Since the component vendors are still cautious about increasing production under the uncertain long term demand, they would rather stay under shortage condition rather than facing future oversupply. Component shortage is still the major uncertainty. Some finish goods will delay shipping until May. The shipment of May is hopefully to increase again if the component shortage vanishes. The June shipment is possible to remain May level.
The current demand growth mainly comes from China and the U.S. market. The strong buying of China consumer market is driven by government support, and the U.S. consumer market also shows signs of reviving. The demand of another major market Western Europe, not only hasn’t started recovering yet but even is still under the risk of continuing slowdown. As far as the commercial market is concern, it’s still pretty quiet.
The China consumer market obviously benefits from its government Home Appliance Subsidy Policy, which started stimulating shipment from March, and the second wave of shipment starts about in May will drive additional demand of 2Q. According to the estimation of vendors, the Home Appliance Subsidy Policy creates additional 3 million units of NB demand, which is a major contribution to the 12 millions scale China market. The shipment increase caused by the policy is distinctive. Except the NB ODMs, the branding company Lenovo is the major vendor that benefits most among industry. Since major international branding companies such as Dell, HP, and Acer mainly focus on 1st tier cities of China, comparatively, Lenovo has been cultivating sales channels in 3rd tier cities and has greater chance to increase PC shipment this year.
The current NB orders are visible through June, which is no longer than six weeks. Therefore the vendors remain cautious about the coming market situation. However, the NB is sure to recover and stay growing quarter by quarter this year. The desktop and motherboard are not as healthy as NB. Since the commercial market demand shows no sign of reviving and the NB products keep squeezing the consumer market, the MB is meant to show negative growth in 2Q under weakening demand. With the uncertain 2H demand, MB vendors are now more flexible while facing 3Q shipment. Except hot season demand, if the market sales are lower than expectation, they will clear their inventory in 4Q and make sure that they won’t get hurt from 4Q inventory.
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