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System OEMs Continued to Push Down SSD Pricing in 3Q19

Wrapping up Trendfocus' Asia tour

This is an Executive Brief from Trendfocus, Inc.:

As previously negotiated prices at various system OEMs continued to push down SSD pricing in 3CQ19, the reductions continued to drive an increased SSD attach rate in PCs.

However, channel pricing did increase during this same timeframe, and now most system OEMs have caught up to the channel where price increases are being realized in 4CQ19. This combined with the product mix shifts driven by the June power outage at the Yokkaichi NAND fab joint venture between Kioxia (formerly Toshiba Memory company) and Western Digital, has caused some OEMs to scramble for supply during 3CQ19. As the quarter closed, though, the supply situation appeared to be improving. At the same time, it is unclear if OEMs are rushing to stock up on SSDs ahead of higher prices in 4CQ19.

Other discussion points centered around hot topics such as QLC and PCIe Gen4. With the end of the year quickly approaching, it seems that 2019 was a bust when it comes to QLC adoption; many industry players feel that 2020 may not be much better in this regard. 2021 seems to be the year where QLC will ‘hopefully’ find its stride in SSD deployments, but only time will tell. For PCIe Gen4, the feedback is more consistent. 2020 is definitely the year for PCIe Gen4 introduction in the client space. There may be differing opinions as to exactly when in 2020 this will happen, but by the end of the year, we should see mass deployments of the next gen interface, especially in higher-performance PC models. In regard to data center deployments for PCIe Gen4, adoption across industry segments is more fragmented and will depend on individual company strategies.

NAND remains in an oversupply situation, but inventory is declining with each passing month, with our latest estimates at approximately 40 to 50EB of excess inventory exiting 3CQ19. Moving into 4CQ19, some in the industry quietly remain skeptical over the timing of the rebalance of the NAND supply/demand situation. Some think there may be a strain on NAND supply through the current quarter that just started, while others think that there is more than enough to last through the end of the year when a supply/demand balance becomes a reality. The anticipated seasonal softness in 1CQ20 for the PC/client segment will help build inventory for the continued rebound in hyperscale moving further into 2020. Overshadowing next year’s demand, though, is the widespread concern throughout the storage industry regarding slowing global economic growth. For now, U.S. tier-1 hyperscale remains unaffected by slowing in other global regions, but ominous signs of manufacturing and services slowing in the U.S. may eventually affect the largest U.S. cloud vendors if U.S. corporations pull back on IT spending, both on new equipment and cloud deployments moving into 2020.

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