According to a research report released by research firm TrendForce Consulting, in the third quarter of 2024, in addition to continuous investment in server construction on the enterprise side, especially the expansion of adoption of artificial intelligence (AI) for enterprise level SSDs, the demand for consumer electronics continued to be weak due to orders. In addition, the increase in production by original factories in the second half of the year tended to be positive. The Sufficiency Ratio of NAND Flash in the third quarter rose to 2.3%, and it is expected that the average price increase of NAND Flash will converge to a quarterly increase of 5% to 10%.
From a product perspective, NAND Flash, due to the original factory's control over production increase in the first half of the year, has accelerated its price rebound recently, helping the original factory regain profitability. However, as various manufacturers begin to significantly expand production in the second half of the year, the retail market's buying momentum has not yet recovered, and the current wafer prices have fallen. The widening decline has led to some wafer prices being more than 20% lower than the contract price, posing a challenge to the future upward potential of wafer contract prices.
In terms of consumer grade SSDs, even though laptop sales have entered the traditional peak season, customers have a more conservative willingness to stock up, especially PC terminal products that have not fully reflected the price increase since last year. Therefore, the purchasing capacity of consumer grade SSDs did not show a significant increase in the second half of the year. As suppliers begin to upgrade their consumer grade PC SSD processes to the 2XX layer, the original factory supply capacity will continue to increase, but the driving force behind price increases is not strong. In addition, with the significant price difference between QLC and TLC products, more PC buyers are expanding their use of QLC solutions, intensifying price competition. The institution expects that the contract price of consumer grade SSDs will increase by 3% to 8% in the third quarter.
In terms of enterprise level SSDs, many companies have continued to expand their AI server construction, and in the third quarter, server OEM orders have significantly rebounded, leading to an increase in procurement. However, due to conservative demand for smartphone and laptop orders, the NAND flash memory market is shifting towards a more balanced direction. In addition to the two manufacturers leading the supply of high-capacity QLC enterprise level SSDs, other suppliers are actively competing for enterprise level SSD orders to accelerate capacity reduction in the second half of the year. This resulted in the price increase of enterprise level SSD contracts converging to a quarterly increase of 15% to 20% in the third quarter.
In the eMMC storage field, there was a lack of driving factors for demand in the third quarter, but the willingness of original manufacturers to continue raising prices was obvious. It is expected that the final price increase will be relatively small, and the contract price will show a slightly flat state.
In terms of UFC storage, due to the sufficient inventory level of smartphone OEM manufacturers, coupled with module factories also starting to supply UFS materials, the demand side has more choices. Faced with the situation of original factories wanting to significantly increase prices in the third quarter, there will inevitably be resistance to rebound. In addition, with sufficient inventory in the hands of buyers and flat market demand, it is estimated that suppliers may make concessions, and the increase in UFS contract prices in the third quarter will be reduced to a quarterly increase of 3% to 8%.
