Storage Enters Adjustment Period: Demand Slows Down And Inventory Rises After Feast

As the person in charge of the e-commerce channel of semiconductor supply chain, Wu Boxin, deputy general manager of Li Chuang mall, was pleased to see the warm embrace of the Internet platform in this field since the first half of the year.

"We didn't expect that in the first half of the year, the overall sales of our mall almost doubled compared with last year. At the beginning of the year, we only estimated that it might increase by 40% - 50%." Wu Bo told 21st century economic reporter that storage products are one of the important contributing factors.

But there are joys and sorrows behind this. According to the industry forecast, this year is the year of storage industry with strong periodicity. Under the influence of the new crown pneumonia epidemic, the Internet sales platform, which symbolizes the incremental market, is rising. Of course, there are also some traditional channels that have no choice but to encounter development difficulties.

In the first half of the year, the inventory industry has experienced high performance and innovation. On the demand side, the mobile phone market has not yet been fully boosted, and the process of server construction has slowed down. Although the large cycle has not ended in advance, the short and medium-term challenges and unpredictability are just around the corner.

Duan Xiting, senior vice president of marketing and R & D of Huirong technology, admitted in an interview with the 21st century economic reporter that due to the uncertainty of the epidemic situation in the third quarter, under the situation of global economic recession, the uncertainty of future development is still very high. For example, the original storage factories originally planned to mass produce 100 + layer 3D NAND products in the second half of 2020, but they were also affected by the epidemic and delayed the launch of high stack products.

"In terms of both demand and supply, the third quarter will be the time when the overall market and economic prosperity hit the bottom. However, looking into the future, with the gradual advancement of 5g and the accelerated development of applications such as AI, virtual reality and Internet of things, the demand for data storage is still strong, and the storage industry will maintain long-term growth. " He pointed out.

Industrial Securities pointed out in the research report that the inventory of the industrial chain will increase in the first half of 2020, but the supply and demand will be roughly balanced in the whole year, and there are still external risks. The inventory of the three original factories has returned to a historical high, so the risk lies in the sales volume of mobile phones in the fourth quarter and the server usage in the data center.

Memory prices plummet

In the first half of this year, the storage industry chain experienced a carnival. The performance of the original storage manufacturers in the upstream is brilliant, and the performance of the storage master chip manufacturers has set a record high again and again.

In Samsung's three major businesses -- mobile phone, storage and panel, storage is the only business with year-on-year and month on month growth in revenue in the second quarter. Meguiar's revenue in the second quarter both achieved double-digit growth year-on-year and month on month, and the month on month performance of gross margin exceeded market expectations.

More striking is Hynix. In Q2 fiscal year, its single quarter net profit increased by 135% year-on-year, 95% month on month, and its revenue also increased by 33% year-on-year.

The performance of main control chip manufacturers is also excellent. Huirong technology financial report shows that the second quarter revenue rose 45% year-on-year, and the gross profit margin reached 50%; qunlian electronics mentioned in the financial report that the total annual shipment volume of SSD and EMMC control chips, PCIe SSD control chips and industry planning control chips reached a record high as of June.

But the momentum is likely to adjust in the third quarter. In June and July of this year, the year-on-year growth rate of revenue in June and July of this year began to slow down, and the revenue growth rate in July was - 5.26%.

This performance also echoed the industry's prediction of the trend - the adjustment period appeared.

One of the intuitive performance of the memory is the price reduction. According to the quotation of China Flash Market in China flash market, SSD prices in channel market have been declining since the end of March. As of early August, the cumulative price declines of SATA 120GB, 240gb and 480gb have reached 33%, 28% and 29% respectively. However, with the market price continuously hanging upside down for a long time, there will be limited space for the price to continue to decline substantially.

Wu Yating, a consulting analyst with trendforce group, also pointed out that the price drop has been maintained in the spot market for a long time, and the formal appearance in the contract market was in early July. In terms of average DRAM prices, she expects a drop of nearly 10% in the third quarter and a further expansion to 15% in the fourth quarter. "At present, the decline of contract price will maintain for at least three quarters, that is, the contract price from the third quarter of 2020 to the first quarter of 2021 will be dominated by a downward trend."

In Wu Bo's view, this is also the reason why the e-commerce market has been popular recently. In the 21st century, when the reporter is busy with the business of the semiconductor industry, he will not contact the upstream suppliers in bulk. Therefore, he will not contact the e-commerce suppliers when he is busy. "Now they contact e-commerce. I think it shows that the business is not good recently, and more channels and forms of business cooperation are needed."

He further pointed out that the sales growth of his mall was due to the increasing number of storage products. "Overall, the number of customers fell in June, and has recovered since July." In terms of price, there is a "steady decline".

Wu Bo analyzes the reasons for the price drop. On the one hand, the customer's action from active stock preparation to panic stock preparation in the first half of the year has led to a high overall inventory level. "The industrial chain is still digesting the inventory, and it is also holding currency to wait and see, which may lead to the price falling.".

On the other hand, demand is restrained. Mobile phones and cars, two of the three major sources of demand in the memory market, have not yet been boosted. The market is still waiting for the next generation of flagship new products from Huawei and apple, so the consumer demand has not been fully stimulated.

"Data center construction for cloud storage has also slowed down." He said that part of the steady growth of its mall comes from customers in the industrial and medical markets, as well as the demand for components based on R & D needs.

Factory inventory returns to historical high

The new change comes from the slowdown in demand in the original power market. This has already appeared in the server field, which is one of the requirements of the storage market in the first half of the year.

Wu Bo felt the market sentiment. "The agent friend told me that the demand value of bat and server manufacturers has decreased in the short term. So for our company, in the server area, this year's budget will be cautious according to the market situation, and will not increase too many server backup. "

In this regard, Duan Xiting told reporters that due to the great uncertainty of the epidemic situation, the data center and cloud computing manufacturers have accumulated a lot of inventory, and they will continue to consume the inventory in the second half of the year.

In recent years, the company plans to be flexible according to its capital exchange plan. It is certain that equipment investment will become lower than infrastructure investment. The capital expenditure plan in 2020 is lower than that in 2021.

Guo zuozhou, vice president of the company, also reported to us that the high inventory level of the original production was only due to the high level of inventory in the 21st century. In the third quarter, when the transportation was gradually controllable, the client wanted to reduce the inventory to a more normal level, and the weak demand led to the price decline. It is difficult to predict the impact on the market if subsequent outbreaks occur repeatedly. However, for the original factory, the capital expenditure of next year is tentatively conservative. Without a substantial increase in output, the market may recover earlier. "

He pointed out that the construction of servers and data centers is the trend of the future, and sustainable growth is inevitable. As far as mobile storage is concerned, although the mobile phone market is in recession this year, it will also have a chance to recover next year.

Duan Xiting told reporters that under the influence of the epidemic, Huirong still had a high growth rate in the second quarter, which was due to the iteration of the storage market itself and the company's advanced R & D reserves. "As UFS has gradually replaced the application of EMMC in smart phones in the market, and Huirong's UFS control chip has also added a large NAND customer, the company's UFS control chip revenue still has a bright performance in the second quarter. It is expected that with the return of the mobile phone market next year, it will accelerate its growth."

On the other hand, with the continuous strong demand for remote office, e-commerce, online education and online games, the introduction of more new generation 3D NAND will also drive down the unit cost of NAND flash, and accelerate more new PCs to use SSD to replace the traditional hard disk. He said that Huirong technology will also expand the product portfolio of PCIe nvme SSD and the sales of UFS controllers, together with the increase of SSD sales of Baocun technology, which will show a strong growth momentum next year.