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Despite facing pricing decreases in Q4 2020 and into January 2021, the solid-state drive (SSD) market is seeing similar supply constraints to the shortages experienced in 2019-2020.

In 2019, a saturated market flip-flopped in response to trade wars as manufacturers cut production. On top of it all, an unexpected 13-minute power outage at a plant in Japan hindered NAND production and caused the global supply to run behind for the months that followed.

In 2020, the rollout of 5G, IoT, and new gaming activity met a competitive market scrambling to recover SSD supply just as COVID-19 shut down manufacturers across the world. A short-lived recovery in Q3 diminished with the intensifying tech cold war, leaving tariffs and allocations as a new barrier. 

Now in 2021, COVID-19 shutdowns are still popping up, and while initial inventory started the year with soft pricing, shortages began appearing in late February. The causes include raw materials, natural disasters and production capacity of components of SSDs like NAND flash memory and controller ICs dwindle in supply, affecting SSD supply as demand continues. 


How is the SSD market in the same situation for the third year in a row?

The SSD shortage does follow the cyclical market demand. But this shortage is different, due mainly to allocation issues from manufacturers as they struggle to meet pandemic-driven consumer demand for automobiles, PCs and smartphones. Global shortages in raw materials like ABF substrate and silicon wafers will also continue to affect production capacity of SSDs, which is already seeing price hikes as controller IC supply becomes tight

The combination of cyclical demand and material shortages has an amplified ripple effect at a time when SSDs are poised to exponentially increase in everyday usage. 

According to MarketWatch, the SSD market is expected to increase a CAGR of 14.94% during 2020-2025, because technology continues to rapidly advance -- thus, increasing the need for larger and faster SSDs.

For example, SSDs are projected to replace HDDs in data centers in the next 6-10 years because SSDs are best suited for executing big data, and provide fewer limitations than HDDs. Additionally, consumer demand continues to rise for smarter technology in mobile phones, automobiles, wireless applications and appliances -- all of which require SSDs.  

The real catalyst for the SSD supply hinges on NAND memory. NAND flash memory, which does not require power to retain data, is quickly becoming the storage of choice in smart phones, enterprise computing, and data centers. Greater SSD usage requires more NAND flash, and current pricing and oversupply of NAND flash is leading to greater SSD adoption, specifically in notebooks. However, it is predicted that NAND flash demand will outpace supply later in 2021 with new mobile devices and CPUs hitting the market. 

Both AMD and Intel will be releasing their new server CPUs in the first 1H of 2020, which will typically spur a new generation of server builds and in turn, quickly increase the overall demand of NAND supply. Overall, the NAND segment is predicted to grow by 19% in 2021, outpacing the semiconductor industry.

The increase in demand is likely to exceed NAND production capacity in Q3, resulting in a NAND deficit that will affect SSD pricing. However, an equilibrium might occur in Q4 2021 or in early 2022, when the new Hynix fab that opened in February 2021, begins to hit its production stride. The fab is expected to expand NAND production, of which the company currently holds third largest market share.


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