Enterprise buyers that have seen prices for NAND flash and solid-state drives rise this year could find the trend taking a downward turn over the course of 2022.
Industry analysts who track the flash market predict the shortages that caused NAND prices to increase this year should start to subside in 2022 and result in falling prices as the year progresses.
Gartner forecasts that flash prices will begin to slide in the second half of 2022, and drop aggressively in the fourth quarter, as the market shifts from undersupply to oversupply, Joseph Unsworth, a research vice president at the firm, said. Unsworth expects prices to continue to decrease in 2023, when he said the addition of new fabrication plants would coincide with a cooling off in demand.
In the meantime, the shortages of NAND flash, flash controllers, printed circuit boards, power management integrated circuits and substrates could lengthen lead times for vendors, OEMs and end customers, Unsworth said. The situation also creates the potential for higher prices for enterprise storage customers later this year, he added.
NAND prices peak in Q3
Don Jeanette, a vice president at Trendfocus, said the largest 2021 increases in NAND prices would be in the current quarter, with enterprise SSDs costing about 9% to 12% more. Jeanette expects the price increases to extend into the fourth quarter, with demand continuing to outpace supply. But he said the range will be in the mid-to-high single digits rather than the low double-digit percentage hike he originally predicted.
Jeanette said some major hyperscale and data center companies could hold off on buying storage while they wait for component shortage issues to settle down. Select major server OEMs also could start to put the brakes on their original purchasing plans and buy less storage in the fourth quarter, he said.
Jim Handy, general director and semiconductor analyst at Objective Analysis, said there's no reason for enterprise buyers to "panic-buy" out of worries that NAND prices will escalate significantly through the end of the year. He said the flash prices of most chipmakers have been roughly flat overall, with a drop in the first quarter followed by a rise in the second quarter.
Handy noted the per-GB spot market price for NAND flash has risen from 6.6 cents in January to 7.5 cents in August -- a 13.6% increase that he also considers to be roughly flat compared to the differentials of 30% or more that have happened in the past.
"The spot market indicates where prices are likely to go. There are signs of a mild upturn, but there's no reason to go out and buy gobs of product," Handy said. "There was the worry about people in China buying all of the SSDs and hard drives in the world to do Chia mining. That caused a shortage in some parts of China, which everybody stood up and paid attention to. But I think, in reality, it's a healthy market."
No need for stockpile SSDs
Handy advised enterprise buyers to pace their flash and SSD purchases based on their consumption expectations, with no need to "make tomorrow's purchases today." He predicted that NAND prices would stay somewhat flat into the middle of 2022, when they could moderate downward. But Handy does not expect to see a major flash price collapse next year.
Jim HandyGeneral director and semiconductor analyst, Objective Analysis
"Usually when flash or any commodity is oversupplied, the prices go to the production cost of the least efficient supplier. That's SK Hynix today," Handy said. "SK Hynix is barely breaking even on their flash. So, if the prices were to go down a whole lot further, they'd have to go below cost for SK Hynix, and that's unlikely to happen."
Handy said most flash demand relates to the rebound of the cell phone market and the growing use of enterprise SSDs for the internet build-out that happened to address the pandemic-influenced shift to working and schooling from home.
Transition to 3D NAND, QLC flash
On the flash technology front, the most important trends are the ongoing transition to 3D NAND with higher triple-digit layer counts and quad-level cell (QLC) that stores four bits per cell, Gartner's Unsworth said. He said those denser technologies would help to address the growing interest in higher capacity flash drives.
But Trendfocus's Jeanette views QLC NAND flash as "very, very niche in the enterprise space." He said more vendors may be starting to ship limited supply of QLC-based SSDs, but he does not see a "hockey stick effect where it ramps anytime soon" to displace cheaper high-capacity hard disk drives (HDDs).
"Whether it's the pricing delta between the two technologies, or lack of vendor support when it comes to supply, or just major data center and system OEM companies out there that feel nearline HDDs continue to be 'good enough,' QLC will struggle in the enterprise for some time," Jeanette said.
Jeanette noted that high-capacity nearline HDDs broke records in the second quarter for sales and unit and capacity shipments, driven by OEM and Chia-related purchases, and research indicates continuing growth for 16 TB and 18 TB spinning disks.
Carol Sliwa is a TechTarget senior writer covering storage arrays and drives, flash and memory technologies, and enterprise architecture.