Phison CEO Khein-Seng Pua reveals unprecedented NAND supply crisis with foundries demanding three-year cash prepayments upfront, warning that consumer electronics companies could face complete shutdown as AI data centers consume global memory supply.
The global NAND flash memory shortage has reached crisis levels that threaten to shut down entire consumer electronics companies by 2026, according to Phison CEO Khein-Seng Pua in a revealing interview with Era News. The Taiwanese storage controller giant, which commands roughly 20% of the SSD controller market and 40% of automotive storage, paints a dire picture of an industry where even major players are struggling to secure basic flash memory supplies.
Pua describes witnessing unprecedented desperation at a recent meeting in China, where mobile and automotive companies—presumably major industry players—were pleading with suppliers for flash memory allocations. The situation has deteriorated to the point where smaller firms may not be able to secure any flash supply at all. "Consumer electronics are finished," Pua states bluntly, predicting that the market "will see a lot of victims" in the second half of 2026.
The severity of the shortage is underscored by what Pua calls an "unprecedented" demand from one of the three major NAND foundries: three years' worth of cash prepayments upfront. This demand represents a fundamental shift in how the semiconductor industry operates. As Pua notes, even TSMC didn't ask Nvidia for that level of prepayment, despite Nvidia being one of the most valuable semiconductor companies in the world.
This cash flow crisis extends beyond just securing supply. Pua reveals that his customers' fulfillment rates have dropped below 30%, meaning that even when companies can pay, they're only receiving about one-third of their requested flash memory. The CEO describes himself and his peers as "memory beggars," highlighting how the power dynamic has completely shifted in favor of foundries.
The price increases are staggering. Pua cites 8GB eMMC modules—ubiquitous components used across consumer electronics and automotive applications—which have risen from $1.50 to $20 in just one year. That's a 13-fold increase that would devastate margins for any product relying on these components. Even at these inflated prices, availability remains scarce.
The impact on major market segments is already being felt. Pua expects smartphone production cuts ranging from 100 to 250 million units this year alone. PC and TV shipments are also bound to drop significantly due to supply constraints. These aren't minor adjustments but fundamental disruptions to entire product categories.
What makes this situation particularly concerning is the shift in AI market dynamics. Pua explains that as AI moves from the training phase (creating models) to inference (actually running models to generate content), the demand for storage will explode. AI data centers require massive amounts of flash memory to store the content they generate, effectively monopolizing the world's NAND supply. This creates a zero-sum game where every terabyte allocated to AI inference is a terabyte unavailable for consumer electronics.
The crisis extends beyond just NAND flash. Western Digital recently announced it's out of hard drives for the current year and already short for 2027 and 2028. This compound storage shortage suggests that the entire ecosystem of data storage is under unprecedented stress.
The parallels to the DRAM crisis are striking, but Pua suggests this situation could be worse. Unlike DRAM, which primarily serves computing applications, NAND flash is fundamental to virtually every modern electronic device—from smartphones and laptops to cars and home appliances. The breadth of impact makes this potentially more disruptive than previous semiconductor shortages.
For smaller companies, the outlook is particularly grim. Pua's warning that companies facing a painful first quarter could be "jumping off a building" by year-end underscores the existential threat many face. Without guaranteed access to flash memory, product lines cannot be manufactured, revenue cannot be generated, and companies cannot survive.
The three-year prepayment demand represents more than just a financial burden—it's a fundamental restructuring of the semiconductor supply chain. Companies must now commit to purchasing flash memory three years in advance, tying up capital that could otherwise be used for R&D, marketing, or other operational needs. This requirement effectively eliminates the ability to respond to market changes or technological shifts during that period.
As AI continues its exponential growth, the competition for flash memory will only intensify. Data centers are projected to consume an ever-larger share of global NAND production, leaving consumer electronics manufacturers fighting over increasingly scarce remaining supply. The result could be a bifurcation of the technology market, where only the largest companies with the deepest pockets can secure the components needed to compete.
The NAND shortage crisis reveals a fundamental vulnerability in the global technology supply chain. When a single component becomes scarce enough, it can threaten the viability of entire product categories and the companies that produce them. As Pua's warnings suggest, 2026 could mark a turning point where the consumer electronics industry as we know it may no longer be sustainable under current market conditions.
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