Phison Chief Warns of Bankruptcies in the NAND Industry

Phison
(Image credit: Phison)

K. S. Pua, chief executive of Phison Electronics, said at a recent conference that further NAND price cuts were not viable and warned of potential bankruptcies among suppliers if the market does not recover. Despite the challenging market conditions, Phison remains focused on the development of NAND controllers, and will keep investing heavily in research and development, DigiTimes reports

Leading makers of 3D NAND — Kioxia, Micron, Samsung, SK Hynix, and Western Digital — lost over $10 billion in flash memory as the companies had to cut down prices of already produced ICs, according to some estimates. Pua asserts that further price cuts are infeasible and cautioned that some suppliers may face bankruptcy if prices continue to decline, though he did not elaborate on whether he expects 3D NAND producers or SSD suppliers that buy flash memory to become insolvent. 

The head of Phison also suggests that there is a good chance that 3D NAND makers will further cut output to stabilize or even increase prices. In particular, Pua sees Micron's decision to stop cutting NAND prices as a collective effort among suppliers to stabilize the market. Phison, which develops controllers for some of the best SSDs available today, intends to refrain from future price cuts to maintain its gross margin, with a long-term goal of 27% (+/-3%), while continuing to expand its market share. 

Phison's Q1 revenue was NT$10.078 billion ($328.64 million), an 18% decrease from the previous quarter. However, due to a reduction of low-margin products and a better product mix, the company's gross profit reached NT$3.202 billion and the margin was 31.78%. Unfortunately for Phison, the company posted a loss of NT$550 million from its investment in Hosin Global Electronics, a supplier of SSDs and other NAND and DRAM-based products.

The chief executive of Phison anticipates losses of NAND suppliers to persist in the second quarter of 2023. But he sees them as a short-term challenge, so the company remains committed to maintaining its innovative edge and focusing on client services. To this end, the company will continue investing heavily in research and development, allocating over 80% of its annual expense budget to R&D. KS Pua reportedly said that while some of its rivals have cut their R&D spending, it has increased its investments in future products by 20%.

Anton Shilov
Contributing Writer

Anton Shilov is a contributing writer at Tom’s Hardware. Over the past couple of decades, he has covered everything from CPUs and GPUs to supercomputers and from modern process technologies and latest fab tools to high-tech industry trends.

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  • Giroro
    Just setting the stage for the longstanding traditions of illegal collusion and price-fixing.
    Reply
  • TechieTwo
    They had better be very careful or they will trigger anti-trust lawsuits costing them billions more in fines.
    Reply
  • InvalidError
    Giroro said:
    Just setting the stage for the longstanding traditions of illegal collusion and price-fixing.
    There is a minimum price stuff needs to cost in order for manufacturers to break even. Nobody benefits from manufacturers getting driven below costs and going bankrupt from extended low demand. If demand fails to rebound before manufacturers burn through their reserve cash, manufacturers go bankrupt. That is what happens in an actually competitive market - manufacturers go under from mispredicting demand and managing funds appropriately.
    Reply
  • plateLunch
    Micron's decision to stop cutting NAND prices...
    Micron CEO Sanjay Mehrotra is such a manipulator. If he is worried about his cash position, he should go back and look at how much he has spent on stock buybacks. Micron is in a volatile business. Cash should be conserved to weather the downturns.
    Reply
  • dogchow
    outside of my boot drive i wont be switching over to ssd till the price gets in the same ballpark as hdd for 8tb +
    Reply
  • mac_angel
    so, would that make it a "short term memory problem?"
    Reply
  • domih
    InvalidError said:
    There is a minimum price stuff needs to cost in order for manufacturers to break even. Nobody benefits from manufacturers getting driven below costs and going bankrupt from extended low demand. If demand fails to rebound before manufacturers burn through their reserve cash, manufacturers go bankrupt. That is what happens in an actually competitive market - manufacturers go under from mispredicting demand and managing funds appropriately.
    Yep.

    https://www.trendforce.com/presscenter/news/20230509-11667.html
    Reply
  • bit_user
    So, where's the best place to find cheap dealz on server SSDs? The last one I bought was on ebay.
    Reply