NAND prices still falling

NAND transaction at the spot market is still weak last week with buyers continue to request for lower quotes. Overall speaking, demand for 8Gb and 2Gb are relatively good but price of Samsung's K9W8Gb suffered rapid drop. On Apr25,

Samsung quotes its 1Gb at US$4.10-4.20; 2Gb at US$5.05-5.15; 4Gb(F9F) at US$9-9.42; 4Gb(K9K) at US$10.25-10.40; 8Gb(K9K) at US$18.75-18.90; 8Gb(K9W) at US$26.50-28.70 and 16Gb at US$35.50-36.

Hynix settled its chip quotes for 1Gb at US$3.95-4.05; 2Gb at US$4.95-5.10; 4Gb at US$7.90-8.10 and 8Gb at US$17.50-17.65.

Notice contract prices are below spot. One could either argue this is a sign of market strength (since spot prices are not falling faster than the contract prices are set) or that suppliers have to undercut the spot market in order to win deals. We leave it to the reader to decide...

A cursory study of the market finds Micron dependent on 2Gb sales and Samsung the lead provider in 16Gb. It should be interesting to see how they explain away these market forces in their next earnings announcements.

Also important is the outlook for consumer devices utilizing flash. As we observed a couple months ago, iPOD sales are flattening. The recent shake-up with Samsung replacing PortalPlayer for the iPOD's controller is perhaps explained by the recent iPOD MP3 sales results and forecast:

Not exactly the growth rate needed to fill all these new 300mm fabs coming on-stream. (Visit http://www.viewfromsiliconvalley.com/id114.html and look at the breadth of news items about fabs losing money on top of the new 300mm fab capacity coming on-stream.)

As widely predicted last year, reduced NAND prices should boost Apple's profits. It's also widely known growth hides a lot of sins. When sales stagnate, however, fixed costs tend to keep growing, reducing profits as a percentage of sales. The shake-up on the iPOD controller tells us Apple is hoping to further reduce costs in order to maintain margins now that sales are stagnating.

In fairness, it's not Apple's "fault" if fabs aren't profitable. Despite the hoopla, iPOD's eight or ten or even 14 million units per quarter is barely a blip towards filling up 300mm fabs. The largest iPOD Nano is only 1GByte which can be supplied with a single 8Gbit NAND IC.

PCs run 55 -60M units per quarter and cell phones run 180 -200M every 90 days. Strong growth in either of these markets would help keep 300mm fabs running. (Although we have strong doubts that even across-the-board strong growth could fill up all the new capacity coming on-stream.)

The good news is it takes a lot more than a miss in iPODs to depress NAND sales. The bad news is plummeting NAND prices tell us sales are failing to ramp in a lot more areas than just iPODs.