The tight supply of NAND flash memory is expected to ease in the first quarter of 2018 as the yield rates at major 3D NAND flash suppliers continue improving, which will significantly benefit second-tier memory packaging and testing service providers, according to industry sources.

The sources said that the demand and profitability of the DRAM segment are experiencing a positive cycle as global leading DRAM suppliers are rationally expanding their capacities, allowing the DRAM market to sustain stable development in the short term.

As to NAND flash memory chips, the average selling price (ASP) is expected to trend downward in the first quarter of 2018 after peaking in the fourth quarter of 2017, as the improving yield rates at makers will help to ease the tight supply of the segment, the sources continued.

This will be an encouraging development to second-tier memory packaging and testing firms. Orient Semiconductor Electronics, for instance, expects its capacity utilization rate to rise significantly in the first half of 2018, and stands a chance of returning to profitability next year. The company has had to rely on EMS (electronics manufacturing services) business to support its operations in the fourth quarter of 2017, when it could hardly compete with larger players for winning more orders amid tight NAND supply and high prices.

In contrast, larger players such as Powertech Technology (PTI) and ChipMOS Technologies will benefit only slightly from the increasing NAND flash supply, but they will suffer significantly from Micron Technology's move to establish its memory packaging and testing capacity in Taichung, central Taiwan. To counter, they are actively striving for orders from China memory suppliers. ChipMOS, for example, is negotiating with Yangtze Memory Technologies (YMTC), seeking to provide backend services for the China maker of NAND flash chips.

Meanwhile, eager to return to the DRAM packaging and testing field, Siliconware Precision Industries (SPIL) has unloaded a 30% stake of its Suzhou plant in Jiangsu, China to Tsinghua Unigroup, aiming to more easily land memory backend orders from YMTC under the group.