In the past year, the global market witnessed an unprecedented drop in the cost of solid-state drives (SSDs). At times, a 1TB SSD could be purchased for less than a hard drive of equal capacity, signaling an advantageous market for consumers. Nevertheless, the era of affordable NAND flash memory appears to be drawing to a close. Phison, a prominent memory controller manufacturer, has raised concerns about an impending shortage of materials for NAND flash memory chip production, as reported by Digitimes.

    Image source: Samsung
Image: Samsung

With this looming shortage in mind, Phison has reverted to prepaying its suppliers for substantial orders of NAND flash memory chips. This action, taken by a major player in the SSD market, suggests a potential disruption in the segment and a probable increase in the cost of NAND chips. The projected material shortage for production is expected to drive up prices for these chips, resulting in an inevitable rise in the cost of SSDs.

While the demand for SSDs had been decreasing due to the COVID-19 pandemic, the year 2023 witnessed one of the most significant declines in SSD prices. This was attributed to prolonged production volumes surpassing demand. Manufacturers responded by consistently lowering prices each quarter to generate interest in their products. Some manufacturers also reduced SSD production volumes in response. However, the anticipated shortage of materials required for production is likely to further decrease supply in the market.

Recent data from DRAMeXchange analysts highlights an increase in spot prices for silicon wafers used for producing 512 gigabit TLC flash memory chips with a capacity of 64GB. The current price is $2,304 per chip, representing a 63.3% increase from June when the price was $1,411. Additionally, the spot price for such chips rose by 12.7% last week, resulting in the cost of 1TB of TLC flash storage increasing from about $22 to $36. How this relates to Phison's recent actions is not explicitly clarified.

Notably, NAND memory manufacturers experienced significant sales losses last year as they resorted to price reductions to sustain demand. However, Phison's warning in May emphasized that further price reductions for NAND flash memory chips could potentially lead to the bankruptcy of some suppliers. Even the largest memory manufacturers suffered substantial losses as a result. This underlines the gravity of the situation and the potential repercussions of the impending material shortage.