SAN FRANCISCO—North Korea's Nov. 23 shelling of a South Korean military base on Yeonpyeong Island resulted in price increases for high-density NAND flash memory parts and solid-state drives (SSDs), according to a report by Westwood Marketing LLC.
A Westwood Marketing survey of NAND pricing conducted on Nov. 26 showed significant increases on 8-Gbit and 128-Gbit densities and modest increases across middle range densities. Pricing on low-density legacy devices has been the rise for several months due to shrinking supply, but the increase in 128-Gbit prices can be attributed to rising tensions on the Korean Peninsula, according to Westwood Marketing (Englewood, Colo.).
Tensions in Korea have been on the rise since the shelling, in which four people were killed. If the situation devolves into a "hot war" between North Korea and South Korea, 50 percent of the world's NAND production could be at risk, Westwood Marketing said.
Bob Witkow, president of Westwood Marketing, said his firm has been focused on the acceleration of NAND price erosion since Samsung, Toshiba and SanDisk announced increased capex budgets and new fab construction several months ago.
"We forecast accelerated price erosion and a 'fire sale' in December," Witkow said. "Everything was falling into place until those doggone North Koreans decided to upset the apple cart." Witkow said lower NAND prices lead to greater and wider adoption, while higher prices slow growth.
Prices for legacy 8-bit NAND parts have been on the rise because major DRAM vendors are shifting production lines to produce more advanced parts, tightening the supply of older parts, according to Westwood Marketing.
I am still not clear why the shelling caused the price rise. I do understand that half of the NAND production would be at risk but this is not unusual for N Korea to be aggressive and then back off after getting some concessions. If things continue then of course prices would rise but even still I wonder how hostilities would affect the actual production facilities.
The North Korean regime is going through a period of change with the dear leader's son poised to take over at the helm of the country soon. Anything could happen then, hence the increased aggravtion this time.
I assume Westwood Marketing was referring to South Korean manufacturers Samsung and Hynix, which together have about 50 percent of the market, give or take. So if you've got half of the world's supply in an area where people are worried that a war could break out, it stands to reason that people are buying more now, driving up the price. Remember also that this survey was done Nov. 26, three days after the shelling. It's quite possible that prices have declined since.
I was referring specifically referring to production operations at Samsung and Hynix in Korea.
With the political tension and potential for further conflict, there are several factors to consider involving reduced production (tightening the market and raising prices), the potential for a military reserve call-up, increased employee absenteeism during a crisis, and the desire of management to spin down operations during a conflict in order to protect assets.
A few of the comments question why increased political tensions influence pricing. Typically, in the semiconductor space one would consider supply and demand along with Moore's Law in calculating semiconductor pricing trends. We have been surveying the NAND market for going on 8 years, and believe external factors such as this one have an equal role in influencing short-term price moves.
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