Samsung Electronics produces over 40% of its NAND flash chips in Xian, China, and its fabs there account for 15% of the total global NAND output. Unfortunately for Samsung, Xian has been placed under strict lockdown following a Covid-19 outbreak. We are seeing conflicting reports about whether the lockdown will impact NAND supplies and pricing. Still, the main difference between optimism and pessimism seems to balance on the length of the lockdown period, which remains unknown. Samsung's neighbors in Xian include important semiconductor firms like Powertech Technology (PTI) and Micron Technology.
In its report on Samsung's Xian plant entering Emergency Mode, Business Korea uses the most alarmist language of all the reports we have pored over. It asserts that "confirmed Covid-19 cases surged" in the area, and the lockdown means "only one person in each household can go out once every two days to purchase daily necessities." Furthermore, company employees must work from home, it reports – something not really workable for most staff in a production environment.
TrendForce also supplied further coverage of the situation in Xian, noting that Samsung's Xian output accounts for 15.3% of the worlds' NAND flash supplies. An interesting, specific detail is that Samsung uses these facilities to output high-layer count 3D NAND flash chips that are the building block for its SSDs.
The TrendForce analysts appear to be rather assured that the "very severe restrictions on the movements of people and goods" in and out of Xian won't have a big impact on NAND supplies or pricing. It argues that Samsung already has stock ready to satisfy customers until mid-January, and there are significant inventories of NAND held by both spot buyers and sellers. Currently, the spot market remains subdued with only minor fluctuations.
NAND Prices Should Still Fall in Early 2022, Says TrendForce
As long as the Xian lockdown has the desired effect in the expected timeframe, there should be little impact seen in supply and pricing. In fact – TrendForce reiterates its forecast that "average [NAND] pricing in 1Q22 will fall by 10-15%."
However, any long-drawn-out lockdown will start to trigger market forces, it is thought, particularly in operations sensitive to time and logistics. Logistics are difficult to predict, as are viruses, but of course, we hope that the strict lockdown in Xian pays off and operations at Samsung (NAND Flash production), PTI (DRAM packaging) and Micron (chip testing) can go back to normal, as can peoples' lives.