AI Demand Strains Supply: Western Digital Adjusts Prices

According to a report by TechNews, Western Digital has formally issued a letter to its partners, notifying them of impending price adjustments for its NAND flash memory and HDD products. The company also confirmed a supply shortfall for both NAND flash memory and HDD products, with plans to continue adjusting prices this quarter, some of which will take immediate effect. Western Digital attributes the surging demand to the rapid expansion of the artificial intelligence (AI) market, which has exceeded initial forecasts, leading to supply constraints.

Western Digital candidly acknowledged that the electronics industry’s supply chain is poised to encounter shortages, which will, to varying degrees, affect product availability, necessitating frequent price adjustments in the future. The company’s ability to handle unexpected demand and orders is limited, necessitating advance notification for any changes, which may also lead to extended delivery periods.

Market data indicates that from the third quarter of 2023 to the first quarter of 2024, overall HDD prices have seen a cumulative increase of 10% to 20%, attributed to manufacturers’ implementation of production cut strategies based on volume pricing. Industry insiders suggest that the tight supply of high-capacity HDD products is expected to persist into this quarter, with the worst-case scenario extending throughout the year. HDD prices are anticipated to continue rising in the second quarter of the year, with an expected increase of 5% to 10%.

The situation with NAND flash memory is even more pronounced. Aside from Kioxia and Western Digital, which increased their production capacity utilization in the first quarter of this year, other suppliers including Samsung and SK Hynix have largely maintained a strategy of low production, leading to a strong upward trend in prices, with increases surpassing those of HDDs.