Buyers who expected a potential shortage of NAND Flash initiated a speculative buying. Consequently, led to a panic surge in spot prices and an approximately 5% to 15% increase in 1H’March NAND Flash contract average selling price. Two major uncertainties in the supply chain are first the raw material from IC upstream vendors and the condition of Toshiba Yokkaichi NAND Flash plants.
1.) Some IC raw material and equipment vendors were located in the Tohoku and Kanto area of Japan, a limited power supply and damages on the major highways brought uncertainty to the production of NAND Flash. Especially the Shin-Etsu Chemical plants located in Fukushima and Shirakawa were shut down for safety inspection. Another global major supplier of silicon wafer, Sumco, its Yonezawa plant was also shut down. Moreover, the crash of Fukushima nuclear power plant continued to cause major problem in the local power supply.
Japan is part of the Circum-Pacific Seismic Zone, for that reason Japanese semiconductor equipments and facilities were designed to withstand some magnitude of earthquake. As a result there were no severe damages on most local IC-related manufacturers. On the other hand, the limited power supply became a major concern among affected manufacturers. It is common for NAND Flash makers to diversify their source of silicon wafer and usually they sustained a 6 to 8 weeks of inventory.
If Shin-Etsu Chemical, one of the major silicon wafer supplier in the world, Shirakawa plant can be back on track within a month. The production of NAND Flash is unlikely to be affected. Based on the help from many countries and Japanese attitude of calm, co-operation & perseverance, Japan demonstrated its ability in recovering soon after disaster; the limited power supply is expected to be solved shortly. Furthermore, NAND Flash makers tend to adopt lithography equipments from non-Japan vendors for most of the 2ynm and 1xnm process technologies, thus it will have little effect on the future production of NAND Flash.
2.) As a joint venture of Toshiba and SanDisk, the Yokkaichi NAND Flash plants (Fab3 and Fab4) were located 500 miles away from the epicenter and were hit with a mild earthquake with a magnitude of 2 to 3. There were no major damages on the facilities and equipments and after a temporarily inspection, production was back to normal last Friday. However, some wafers were reported destroyed from the earthquake, we estimated the damage may reduce below 10% of the total Toshiba/SanDisk output in 1H2Q11. In short, given no additional supply increase from other NAND Flash suppliers, the earthquake may reduce the global NAND Flash bit supply by less than 4% in 2Q11.
The supply from Toshiba/SanDisk camp declined, and possibly brought a favorable outlook to the traditionally dull sales season of 2Q11. However, the shipment of some non-iPad tablet may not reach the original 2Q11 expectation. Also, from March to June is traditionally the recessing sales season of retail memory and UFD card market, plus a weaker demand from the NAND Flash end-product applications in Japan market in the short term.
It is unfavorable to the shipment and sales of NAND Flash end-products if some key components and raw materials should face the shortage or surge in price. Thus, given the factors mentioned above, DRAMeXchange expects the over-supply gap in 2Q11 may be narrowed by the mixed effects from the earthquake.
DRAMeXchange expects NAND Flash spot price to sharply increase due to the uncertainty in supply, right after the earthquake. Nevertheless, the market is rational after the uncertainties being clarified, the price will keep stable and mainly reflect the true supply and demand status in 2Q11. As affected manufacturers and power & logistic infrastructures recover from the earthquake in 2Q11, the affected NAND Flash supply will also be improved.
With the traditional recessing sales season in mid-2Q11, all these factors together will cause price to go down. The earthquake changed the originally declining NAND Flash price into a sharp rebound in mid-March. Lastly, DRAMeXchange expects the decline in the annual NAND Flash contract average selling price may be eased slightly in 2011.
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