Morgan Stanley Securities warned that weaker demand will lead to a more rapid decline in memory prices in the second half of the year, affecting all three major memories.

The three major memories are dynamic random access memory (DRAM), coded flash memory (NORFlash), and storage flash memory (NANDFlash).

The report points out that due to weak demand and high inventory levels of manufacturers and clients, the memory supply chain will face tremendous de-stocking pressure, causing prices to fall further in the second half of the year, and the severity will be greater than market expectations.

For the Chinese Taiwanese manufacturers, DAM believes that, in addition to Macronix, Huabang Electric, Nanya Technology, and Powerchip, which are worse than the broader market, even the original relatively bullish Qunlian, the evaluation turned to neutral. Although the growth momentum of Qunlian in mainland China is strong, but due to high inventory and NAND price environment deterioration, NAND boom cycle is unlikely to recover quickly in the short term.

According to the report, the industry believes that SK and Samsung have stopped producing 1Gb and 2Gb memory, and have reduced DDR3 production. However, as the market outlook for CMOS image sensors tends to be weak, Samsung is using its CIS capacity to produce DDR3, making the special DRAM supply situation even less favorable. In the long run, SK and Samsung will not give up on the consumer DRAM market, but move to DDR4 to focus on 4Gb products.

Not long ago, TrendForce also indicated that the DRAM market demand bit growth in 2023 is only 8.3%, the first time in years that it is below 10%, and much lower than the supply bit growth of about 14.1%, and it is expected that the DRAM market situation in 2023 at least is still quite severe under the oversupply situation, and the price will continue to decline. Although the price is expected to fall in the first half of next year, the average price is expected to decline for several quarters in a row, which will stimulate the growth of the enterprise SSD market in terms of single-unit capacity.

From the perspective of various applications, high inflation continues to impact the consumer market demand, so the priority correction of inventory is the primary goal of the brand, especially in the first two years in the face of the epidemic caused by the shortage of upstream components, the brand over-booking, coupled with the slow sales of channels, making the current notebook machine inventory is slow to depletion, resulting in further weakening of demand for notebooks in 2023. The proportion of PC applications will be further reduced, by LPDDR5 and DDR5 continued penetration. However, because the price of DDR5 is still high, it will become a limit to the growth of PC single-unit capacity, and it is estimated that the PC DRAM single-unit capacity will increase by about 7% annually in 2023. If DDR5 OEMs lower their prices next year, the capacity may rise to 9%, depending on whether DDR5's price premium compared to DDR4 can be effectively converged.

As for PC client SSDs, the average carrying capacity is expected to rise only slightly by 11%, the lowest in the past three years. The main reason is that the epidemic in the past two years has led to a large increase in shipments of notebook computers, but also drive the SSD load rate, while the average capacity by the past SSD master IC supply tight and actively push up the average capacity growth, however, the cost of notebook computers in the past two years by the price of parts and components continue to increase, making the 2023 PC brand factory are planning a more conservative SSD capacity demand bit yuan.

Server DRAM, as the fifth generation of memory specifications, the new Sapphire Rapids and Genoa have increased the cost of the whole machine, and the average capacity of the server began to face restrictions, not purely upgrade the previous The demand side will focus more on the hardware cost and the practice of ESG strategy, and it is estimated that the average capacity of server DRAM will be limited in 2023, with an annual increase of about 7%.

As for Enterprise SSDs, the new Sapphire Rapids and Genoa platforms are beginning to upgrade to support PCIe 5.0 transfers in order to meet HPC and big data computing needs. This trend will contribute to the growth of the average capacity of enterprise SSDs next year. In addition, as the overall NAND Flash oversupply pattern continues into the first half of next year, the reduction in NAND Flash prices will increase the proportion of products shipped above 4TB, and it is estimated that the average capacity of enterprise SSDs will grow at an annual rate of 26% in 2023.

Mobile DRAM, the Android camp currently carries capacity to meet the needs of the daily operating system is quite sufficient, so in the absence of innovative applications, based on the entire machine cost and high-end sales accounted for a relatively low percentage of the total number of products. Therefore, in the absence of innovative applications, based on the cost of the whole machine and high-end sales accounted for a relatively low consideration, the brand's willingness to enhance the capacity also slowed down. As for the iOS camp, due to the high degree of optimization of its operating system, reducing its demand for mobile DRAM capacity, TrendForce estimates that the capacity of mobile DRAM will only increase by 5% annually in 2023.

In the smartphone NAND Flash segment, with the gradual expansion of 5G smartphone penetration and the need to configure larger storage capacity to meet the demand for high pixel photography, it will bring basic momentum for the increase of NAND Flash capacity in smartphones. At the same time, the iPhone product portfolio is still moving towards higher capacity; high-end Android models are also following up with 512GB as standard equipment, while the storage space of mid- and low-end models continues to increase with hardware upgrades, so the overall average capacity still has room for growth. It is estimated that in 2023, the annual growth of NAND Flash capacity for smartphones will remain at 22.1%, which is slightly lower than that of 2022, but still at a high level.