The supply shortage that persisted in the NAND Flash market during the third quarter will become more acute in the fourth quarter due to surging demand from clients in the smartphone and SSD industries, says DRAMeXchange. Prices of NAND Flash wafers and memory cards will be on an upswing until the end of 2016, while eMMC, eMCP and SSD products are also going to see their prices go up, the research firm says. Compared with the third quarter, NAND Flash suppliers will enjoy even higher margins and better revenue results in the fourth quarter.

"Smartphone demand has remained fairly strong and is the main reason why the NAND Flash market started to boom in the second half of 2016," said Sean Yang, research director of DRAMeXchange. "Sales of iPhone 7, though have not achieved records comparable to the sales of previous iPhones, have been steady and are at an expected level. More importantly, the upgrade of iPhone 7’s storage options (a doubling of capacity for each of the three options) represents a several-fold increase in Apple’s consumption of NAND Flash."

At the same time, Chinese smartphone brands such as Huawei, OPPO and Vivo are placing additional order with their NAND Flash suppliers due to the brisk sales of their mid-range and high-end devices. Hence, high-capacity eMMC and eMCP products are in great demand. On the whole, increases in both smartphone shipments and the memory content per box for devices have led to further tightening of NAND Flash supply.

Demand from SSD manufacturers are also on the rise. As SSDs are approaching price parity with HDDs, major PC-OEMs are installing SSDs in more of their notebooks in order to improve system performance and attract consumers' attention. DRAMeXchange estimates that the average notebook SSD adoption rate worldwide for 2016 will exceed 30% for the first time – arriving to almost 33%.

Likewise, enterprise grade SSDs are gradually replacing high-speed HDDs. Demand for enterprise grade SSDs has been expanding rapidly in the second half of 2016, driven mainly by server manufacturers and data centers based in China and the U.S.

"Though major NAND Flash suppliers are speeding up their respective timetables for 3D-NAND Flash production, almost all of them with the exception of Samsung are currently facing challenges related to raising the yield rate and improving production efficiency," said Yang. "Furthermore, suppliers’ migration to the 3D-NAND technology has affected their 2D-NAND (planar NAND) production."

Going into the fourth quarter, demand for eMMC and eMCP products, which are still mostly based on the planar architecture, will surge in connection to the rising smartphone demand. This in turn will take part of the supply away from memory module makers, causing NAND Flash prices to jump even higher compared with the prior quarterly period.