Due to disappointing sales of high-end smartphones, demand for NAND flash will likely be weaker than expected in the third quarter of 2013, according to industry sources. NAND prices have fallen about 5% in July, and are likely to continue their decline in August and September, the sources said.

　　There was optimism in the industry previously about NAND flash shortages caused by high demand in the third quarter, and the rising chip prices. However, end-market demand, particularly demand for high-end phones, has been disappointing, the sources indicated.

　　In fact, NAND flash chipmakers could have been over-optimistic about demand from system OEMs in the third quarter, the sources said. Since the beginning of 2013, module houses and channel distributors have been warned that the memory could be in limited supply.

　　Usually chipmakers give priority to their system OEM clients, which in turn limit their supply to module houses and channel distributors.

　　The industry also raised concerns that the arrival of new capacity at some major chipmakers might lead to an increase in supply and put chip prices under downward pressure in the fourth quarter.

　　Toshiba will start applying its next-generation 1Xnm process technology to mass production of NAND flash chips in the fourth quarter. The vendor will also expand the capacity of its NAND flash chip fabrication facility in Yokkaichi, Japan with new capacity expected to come online in 2014.

　　Rival company Samsung Electronics is also set to run a new 12-inch fab in Xian, China to produce NAND flash memory sometime in 2014. Global supply will increase further, putting downward pressure on chip prices, the sources noted.

　　Despite an unexpected slowdown in high-end phone sales, demand coming from data centers and server-use SSDs for cloud computing remains promising, the sources believe. In addition, there is still huge demand for eMMC devices for use in entry-level and mid-range smartphones, the sources said.