Issues at WD and Kioxia NAND Factories... What Are the Implications of Production Disruptions?

"NAND Prices May Rebound 5-10% in Q2 This Year"

[Asia Economy Reporter Park Sun-mi] Regarding the production disruption at the NAND factory jointly operated by Western Digital (WD) of the United States and Kioxia of Japan, the prevailing view is that the timing of the NAND price rebound is accelerating, and that the Korean semiconductor industry, including Samsung Electronics and SK Hynix, could benefit from this.

On the 12th, the semiconductor industry noted that WD and Kioxia hold a 32.5% share of the global NAND flash market, and since the timing for the normalization of NAND factory operations remains unclear, they expect prices to rebound by 5-10% in the second quarter of this year.

Market research firm TrendForce has revised its previous forecast of a 5-10% decline in NAND flash prices in the second quarter of this year to a 5-10% increase. Although the dominant expectation was that the NAND flash market would experience downward price pressure in the first and second quarters due to supply exceeding demand, the occurrence of material contamination issues at two Japanese factories jointly operated by WD and Kioxia, ranked 2nd and 4th in global NAND market share, has caused production disruptions, creating an environment conducive to price increases.

WD-Kioxia has not provided specific information regarding the level of material contamination or the expected timing for normal operations, but the industry believes contamination is concentrated in 3D NAND, and that NAND flash memory production will decrease by at least 6.5EB (exabytes; 1 exabyte is approximately 1 billion GB). TrendForce explained, "This represents about 13% of WD-Kioxia's factory shipments in the first quarter of this year and about 3% of annual shipments. If the extent of contamination damage is confirmed, the scale of the damage could increase."

"Production Disruption Will Have Significant Impact on Prices"

Kim Young-geon, an analyst at Mirae Asset Securities, analyzed, "The scale of the production line affected by this NAND incident is similar to the Kioxia power outage in 2019. Despite NAND inventory levels being high at about 10 weeks at that time, prices rose by 10% in the third quarter of 2019 after the outage. Considering current inventory is about 7 weeks, the impact of production disruption on prices could be even greater."

The securities industry expects domestic companies such as Samsung Electronics and SK Hynix to benefit from this. Park Yoo-ak, an analyst at Kiwoom Securities, said, "There is a possibility of additional losses beyond the 6.5EB during the normalization process of WD-Kioxia factory production, and the timing of factory operation normalization is uncertain. The benefits of production disruption could be received by Samsung Electronics, SK Hynix, and other NAND supply chain companies."

Choi Do-yeon and Nam Gung-hyun, analysts at Shinhan Financial Investment, also forecast, "The scale of production disruption at WD-Kioxia factories could be larger than currently disclosed. As a result, the rise in NAND spot prices could proceed more robustly, and the timing of fixed transaction price increases could appear earlier than previously expected, starting from the end of the first quarter. The earnings consensus for Samsung Electronics and SK Hynix could rise more sharply."

This content was produced with the assistance of AI translation services.