Worries about supplier cutbacks, consumer spending erode iSuppli NAND outlook

Apr. 8, 2008 – Weakened consumer spending — not just in the US, but now apparently a global trend — and signs that major buyers are slashing orders have caused analyst firm iSuppli to reduce its outlook for the NAND flash sector in 2008 by a full two-thirds. The firm now projects global NAD flash memory revenues rising 9% this year to $13.9B — instead of an anticipated 29% rise to $17.9B, essentially removing $4B from the market.

Spending growth on consumer devices that rely on NAND flash — e.g., MP3 players, USB drives, and digital still cameras — is expected to slow due to the US subprime mortgage mess and a collateral impact on worldwide economies, and those projections are causing NAND buyers to slow their own spending this year, according to Nam Hyung Kim, director and chief analyst, memory ICs/storage systems, in a statement.

Notably, Apple has not commenced large-scale NAND orders, after making “huge” purchases in 2007, he notes, citing press reports in Asia. The analyst firm now expects Apple’s NAND spending to rise just 12% this year (to $1.4B), instead of a previously anticipated 32% surge, resulting in a $400M gap in the market. Apple is expected to use more of the NAND for solid-state drives, an option on its MacBook Air notebook PC, but those volumes are tiny when compared with what it would have spent for NAND in its iPhones and iPods.

“In order to plan production, suppliers of commodity components like flash memory work closely with their major customers to forecast expected demand levels for the coming quarters,” Kim writes. “News that a major buyer is slashing its expected order growth levels has a major effect on the supply/demand balance and pricing of a commodity part, such as NAND flash memory.”

Meanwhile, the firm sees other top NAND flash buyers reducing their spending growth in 2008 to single-digits. 2007’s top NAND flash buyer SanDisk is expected to spend 8.4% more in 2008 (to $2.2B), well below a projected 33% increase, while No.2 NAND buyer Sony is seen increasing spending 6.8% to $1.4B, less than half its anticipated 16% Y-Y increase. Kim also pointed to Intel’s recent reduction of internal forecasts citing weakening NAND pricing, and that Hynix has said it is reducing NAND output while market conditions remain soft.

Kim also noted that worldwide per-MB pricing for NAND flash declined 36% in 1Q08, and forecasts a 13% decline in 2Q08, though prices should stabilize somewhat in 2Q as OEMs take advantage of the low NAND ASPs to replenish their inventories. That pricing stabilization in 2Q would allow global NAND revenue to cling to positive growth in 2008, he noted.


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