NAND Flash Suppliers Continue to Adjust Their Supply Policy; 1H May NAND Flash Contract Price Rose 0 to 12% 

Average NAND Flash contract price of 1H May, 2009, rose between 0 to 12%. In 1H May, following previous NAND Flash suppliers' allocation policy in April, upstream suppliers provided system makers as their priority and reduced allocation to memory card makers. NAND Flash contract price slightly rose in 1H May due to China’s “Home Electronics down to the country side” Policy and restocking demand of 3G handset upgrade and copycat cell phone market. Due to as low as one-month visibility in NAND Flash market and sustained price surge over the past 4 months, most clients are more conservative in purchasing and keep observing current price trend. However, as NAND Flash suppliers will adjust 2Q09 output pace, we expect the contract price to roughly stabilize in the short-term. 

After Mid April, both upstream and downstream NAND Flash suppliers and makers announced their 1Q09 earning release. Most upstream suppliers have still suffered from financial loss though the situation slightly improved when comparing with 4Q08. On the other hand, downstream handset and DSC makers also faced the worst shipment results both in QoQ and YoY. If we look into the previous shipment patterns, the number in 2Q will usually increase while comparing with 1Q. We expect NAND Flash suppliers to continue to adjust their output growth rate and stabilize NAND Flash price to improve their profitability with gradually recovering downstream demand.

Intel Continues to Expand Its Pirate (Shan Zhai) Netbook Market Share

Since the Chinese pirate (Shan Zhai) netbook trend is inevitable to stop and in order to prevent VIA from gaining market share, Intel clarified its stance of supporting the pirate NB at the beginning of the year. Intel provides Atom CPU to the Chinese vendors, such as Unicomp, Weibu, and Jwele, and helps them with reference board designing. The purpose of these actions is enabling the Intel alliance to compete with the VIA Global Mobility Bazaar Alliance.

From April, since there were no worries about component supply and design, the pirate NB Intel parts adopting rate surged up in spite of the US$ 10 premium of Atom CPU over the VIA C7. The performance advantages attracked the vendors to adopt Intel CPU. As far as the April pirate netbook shipment is concerned, the Intel market share had already reached 75%.

Chinese pirate NB is at the early stage of its product life cycle and attracting all kinds of market participants. This resulted in grey import Intel Atom CPU flowing all over the place, and interfering the normal CPU price. Therefore the actual story about the recent sayings that Intel will stop providing Atom to pirate netbooks is just one way of controlling the supply and bringing it back on track again. Currently the monthly CPU shipment supplied to Chinese pirate netbooks through Synnex and WPI reaches 200K on per month. Intel is also providing extra support to BYD and Top Star in order to help them entering the netbook ODM business.

The popularity of pirate netbooks in the Chinese market has caused component shortage, and currently the components can only fulfill 50% to 70% of demand. The shortage situation is expected to be eased in June. The April shipment was about 300K and expected to double in 3Q or 4Q09. Optimistically, the 2009 annual pirate netbook is expected to reach 4 million units. Even with conservative estimation, the shipment of 2.5 million units will be easily fulfilled.