This year has been a roller coaster for the components industry. That trend continued in the third quarter for the NAND Flash segment. Revenues in the space stayed essentially flat, rising just 0.3 percent compared to the previous quarter.
Experts note that the lack of growth is due to weak demand from the server sector. The effects of companies purchasing components in excess during the second quarter in response to COVID-19 were also felt in Q3.
Spending Catches Up
Companies in the server and data center segments are largely responsible for the flat NAND revenues in the third quarter. Due to fears related to the pandemic, most firms decided to aggressively purchase components in the earlier months of 2020.
That means their inventories are currently full. Meanwhile, the effects of the pandemic have been mitigated and widespread supply chain disruption hasn’t occurred again since the beginning of the year. Although that is a good thing for the industry as a whole, it means that companies don’t need to purchase as many components.
Instead, most firms are focused on cutting back spending and managing their inventories as the year draws to a close. That mindset has led to an overall decrease in demand for NAND Flash products.
However, a major drop didn’t occur thanks to skyrocketing demand for consumer devices.
The second half of 2020 has seen the smartphone industry recover nicely. Meanwhile, as companies shift to remote work and schools turn to virtual education, consumer products are more in-demand than ever. Gadgets like laptops and tablets are flying off the shelves.
That demand wasn’t enough to overcome the dip in the server segment, however, since many of the laptops are Chromebook devices. Evertiq notes that the increase in demand for these laptops doesn’t raise NAND Flash consumption since they don’t feature a large storage capacity.
The fourth quarter doesn’t look much better for the NAND Flash space. Companies are expected to continue churning through the inventory they have on-hand, resulting in less purchasing overall.
On top of this, procurement from Huawei will no longer bolster the market as a result of stricter export rules in the U.S. While other Chinese brands will be stocking up to try and claim that market share, it won’t be enough to spark growth in the NAND Flash sector.