How NAND Earnings Can Hold Up Even When Prices Fall
Learn to read NAND prices alongside cost per bit, bits stored per cell, and SSD product mix. Examine how revenue and profit can diverge when falling prices coincide with rising shipments.
NAND earnings depend on the gap between selling prices and production costs more than on prices alone. If bit shipments increase and cost per bit falls faster than selling prices, profits can improve even as prices decline, but product mix and inventory costs must also be checked.
Compare Storage Capacity Rather Than Chip Counts
The NAND used in storage devices varies in capacity from product to product. This is why a decline in the number of chips shipped does not necessarily mean a decline in the total storage capacity supplied. Micron's explanation of NAND technology distinguishes TLC and QLC by the number of bits stored per cell. However, do not assume that increasing bits per cell reduces the cost of the finished product by the same proportion. Controllers, error correction, endurance requirements, and yields may also change, so examine the specifications buyers require.
The Difference Between Component Prices and SSD Revenue
NAND wafer prices, individual chip prices, and consumer SSD selling prices refer to different stages of the product. Enterprise SSD revenue includes value from firmware, performance qualification, and reliability, beyond storage capacity alone. If a company's NAND average selling price holds up better than market prices for commodity chips, consider whether a higher share of value-added products, as well as pricing power, explains the difference. When comparing earnings across suppliers, first check whether their mix of products closer to raw components and finished solutions is comparable.
More Layers Do Not Automatically Mean Lower Costs
When assessing the economics of a process transition, distinguish theoretical storage density from actual saleable output. If processing takes longer or early-stage defects increase, designing more bits into a product does not by itself improve profits. Investors can connect publicly disclosed generation transition schedules, cost-per-bit trends, utilization, and inventory commentary. If a company does not disclose its exact cost reductions, avoid assuming they offset the entire price decline. Instead, calculate sensitivities for scenarios with weaker and stronger cost improvements. Include customer requirements such as data retention and write endurance in cost comparisons. Even two products with the same storage capacity cannot be treated as perfect substitutes for price comparisons if their required performance differs.
Worked example
Hypothetical example: If bit shipments increase 25% from 100 to 125 and prices fall 20% from KRW 1 to KRW 0.8, revenue remains KRW 100 in both cases. If cost per bit falls from KRW 0.7 to KRW 0.5, gross profit increases from KRW 30 to KRW 37.5. If cost falls only to KRW 0.65, gross profit declines to KRW 18.75. The same price and volume outlook produces different results depending on the cost assumption.
What to check
- Distinguish NAND chip revenue from revenue from finished SSDs
- Check changes in the mix of TLC, QLC, and customer groups
- Review initial costs associated with generation transitions
- Compare declines in price per bit and cost per bit
Sources and primary materials
This is educational material about research methods. For an actual company decision, verify the filings and primary sources for the relevant period.