Silicon Motion increases sales of SSD controllers amid NAND shortage, but expects NAND shortages to get worse in 2027 — 'supply conditions will become even worse'

SSD pricing hit record highs in Q1 2026 amid high demand and insufficient supply of 3D NAND memory for consumer applications. Nonetheless, there are bright spots, too: Silicon Motion has managed to increase revenues from its SSD controllers business this year, particularly because sales of higher-end devices were high. Nonetheless, while the company is confident of demand from the data center sector, it also expects disparity between supply and demand for consumer applications to get worse going forward.

“Our high-end controller is selling very well, including PCIe 4.0 and PCIe 5.0 controllers, UFS 3.1 and eMMC 4.1,” Nelson Duann, senior vice president of Silicon Motions' client business unit, said in an interview with Tom’s Hardware. “But the low-end part [of the business is suffering as] consumer demand going down. But as ASP [of high-end controllers] is higher, it compensates [dropping sales of lower-end controllers]. So that is why our revenue momentum is still going up.”

Indeed, Silicon Motion’s first quarter sales were $342.1 million, up 23% quarter-over-quarter and 105% year-over-year, with sales of SSD controllers up 40% - 45% YoY. Apparently, the company managed to increase sales of both consumer and enterprise-grade controllers. In the latter case, the company ramped up shipments of its PCIe 5.0 SSD controllers as demand from the data center segment was particularly high.

But while demand from AI and cloud sectors is not going anywhere and the company is probably going to sell a boatload of enterprise-grade SSD controllers, the biggest question about client applications is whether NAND memory supply constraints are going to ease anytime soon. Apparently, they are not; they are going to get worse.

“For the second half of this year, I expect the situation to remain largely unchanged; supply will stay very tight,” Duann said. “2027 is going to be the worst [from NAND supply perspective]. […] Looking ahead to next year, NAND makers are very pessimistic. They tell us supply conditions will become even worse because CSPs and data center operators continue to increase their demand. As a result, NAND suppliers have little choice but to focus their allocation on the data center market.”

This does not mean that major NAND memory producers will not supply flash for consumer applications at all; they will, so we are going to see new products announced and shipped. However, the supply and demand disparity on this side of the NAND business is expected to get worse in 2027.

“They still want to maintain some supply for consumer products, such as client devices, and a smaller share for automotive applications, but those allocations are not enough to change the overall situation,” Duann said.

While this is certainly not a good situation for consumers, for companies like Silicon Motion, it may not be that bad. SSD makers may reduce the capacity of their drives to meet unit demand, which means that they will still buy SSD controllers and, in some cases, even increase their controller purchases.

The full interview with SMI's Nelson Duann will be published later this month.

Follow Tom's Hardware on Google News, or add us as a preferred source, to get our latest news, analysis, & reviews in your feeds.