Impact by the northeastern earthquake in Japan, DRAM vendors began to secure the silicon wafer supply while silicon vendors also released the inventory to meet the demand. Given the consideration of one month inventory in hand, the normal wafer-in production can be assured till end of 2Q11.

However, the overall DRAM supply chain will likely face the potential challenge if major silicon vendors such as Shin-Etsu and SUMCO are unable to get back to normal operation in coming weeks. Meanwhile, we also see some yield issue of 40nm migration and thus it enhances the uncertainty toward the DRAM supply to PE-OEMs. Therefore, some PC-OEMs intend to rise up the inventory level and accept the higher price from the deal with DRAM vendors and result in the raising contract price in 1H’Apr..

DRAM industry will accelerate the migration to high value-added products to cope with raw material shortage

One month after Japan earthquake, the raw material shortage has become the critical concern. Semiconductor industry faces the strongest challenge since Shin-Etsu and SUMCO facilities in northeastern Japan are still out of operation. Worldwide silicon wafer supply is short of 20%-25%. With the coming raw material shortage, DRAM vendors will likely revise the production target to high value-added products and accelerate the technology migration instead of low margin and low technology products.

According to DRAMeXchange, Samsung plans to move some DRAM capacity to NAND products given the better outlook for NAND industry and will put its priority on NAND Flash at the consideration of silicon wafer shortage. Elpida has already suspended the commodity DRAM production in Hiroshima and merely maintain the high value mobile DRAM and some foundry business.

Also, Elpida will 100% outsourced commodity business to Rexchip and Powerchip. Rexchip will accelerate the 38nm migration, 32nm migration in 2H11 and try to maintain the sustainable output. Powerchip will rise up the 45nm portion and high margin foundry business to maintain the profitability.

Nanya and Inotera are less damaged by the earthquake sequence. Nanya will MP their mobile DRAM while Inotera aims to increase the portion on mobile DRAM and server-basis memory in 2H11. ProMOS is evaluating the possibility on DDR3 2Gb production to ease the impact.

Winbond had already changed the product mix and target at high margin products last year and is expected to show the satisfactory performance if silicon wafer supply can be consistent.