Regardless of any slowing of market growth or anticipation whether or not 2017’s new releases by Samsung and Apple will cause a sharp spike in demand, on Tuesday, March 21, Apple quietly announced minor changes to its existing iPhone line up that point to even greater NAND consumption. Last year’s doubling of base capacities in many phones was the main driver of the NAND shortage that began in CQ2 ’16 with the supply chain ramping up for the new models to come. Despite some bumps in the road (Samsung recall of the Note 7 and uncertain demand for a visually similar iPhone 7/7 Plus compared to Apple’s prior model), the higher average capacities and resultant phone demand has kept NAND supply tight even into the seasonally softer first quarter of 2017.

Apple’s value model, the iPhone SE, had its base capacity raised to 32 GB, from a paltry 16 GB prior, this week, making 32 GB the entry-level capacity across the entire iPhone line up. Even more importantly, all mid-tier capacities now stand at 128 GB, which is generally the sweet spot for most users and a nearly unthinkable capacity for a phone just a couple years ago. Imaging has become one of the primary functions of smartphones – when was the last time you saw anyone carry around a stand-alone compact digital camera? In addition to still photography on 12 megapixel sensors (or higher), all phones record video at a minimum resolution of full HD (1920 x 1080 pixels) with all newer models also supporting 4K resolution. Even if one relies on the cloud for bulk image storage, most users still carry around on their current phones the photos and videos taken on multiple previously owned smartphones, further boosting capacity demand over time. Samsung – a company that has enabled capacity expansion through micro SD cards and never shy about raising specifications of its screens, storage and camera resolutions – is rumored to be raising the base capacity of its soon-to-be-revealed Galaxy S8 generation to 64 GB.

If this year’s top-tier smartphone releases show the slightest signs of improved demand over prior generations (a very conservative outlook), NAND demand for this segment will continue to pressure supply, even as the industry ramps up the latest generation of 3D NAND across virtually all suppliers. SSDs for enterprise applications will receive some priority given the need and profitability of those products, while PC OEMs will have to make some tough choices on where to deploy client SSDs given the tight supply and elevated pricing expected to last through most of this year. While the demand situation may soften unexpectedly, 2018 is looking more like the earliest time the NAND supply and demand will return to a state of balance.