Figure 1 compares the estimated required capex needed to increase NAND flash bit volume shipments 40% per year, sourced from a chart from Micron’s 2018 Analyst and Investor Event in May of this year, versus the annual capex targeting the NAND flash market segment using IC Insights’ data. As shown, Micron believes that the industry capex needed to increase NAND flash bit volume production by 40% more than doubled from $9 billion in 2015 to $22 billion only two years later in 2017! This tremendous surge in required capital was driven by the move to 3D NAND from planar NAND since 3D NAND requires much more fab equipment and additional cleanroom space to process the additional layers of the device as compared to planar NAND.
Historical precedent in the memory market shows that too much spending usually leads to overcapacity and subsequent pricing weakness. With Samsung, SK Hynix, Micron, Intel, Toshiba/Western Digital/SanDisk, and XMC/Yangtze River Storage Technology all planning to significantly ramp up 3D NAND flash capacity over the next couple of years (with additional new Chinese producers possibly entering the market), IC Insights believes that the risk for significantly overshooting 3D NAND flash market demand is very high and growing.