Components | June 13, 2011

1H'June DRAM contract price fell 2.74%

1H’June contract prices indicated a downward trend. DDR3 2GB’s average contract price is USD 18.25 (1Gb USD 0.98) and 4GB is USD 35.5 (2Gb USD 2.06), down by 2.67% and 2.74%, respectively.
From the markets’ perspective, raw wafer shortage crisis incurred from Japan earthquake is officially relieved. DRAM makers are expected to take on their full capacity in the second half of the year. 2GB contract prices once surged to USD 19 in May.

However, affected by uncertainty over PC demand during 2H11, slow growth in contents per box and weak recovery of European and US economies, PC-OEMs hold conservative attitudes toward replenishing their inventories. Several Module Houses’ selling prices to PC-OEMs are lower than the contract price. And also, most transactions during 1H’June were closed at the price range between the average and the low of the contract price. Thus, the possibility of further downward contract prices in 2H’June is greatly enhanced.

Post-PC era has come. Tablets and smartphones taking lead in the markets.

According to DRAMeXchange’s research, increasing popularity of tablets and smartphones this year has driven down PC’s shipment, which usually posted an annual double-digit growth but now is significantly slowing down. This year, the global PC shipment will likely only grow by 5%, slightly higher than 2.4% during the financial crisis in 2009. There are no signs showing that the global economy will encounter another serious setback this year.

What’s changed is that consumers have more options other than PC. Heatedly-discussed tablets and smartphones certainly had a charismatic stage presence. Those two hot-selling products are expected to reach the annual growth as high as 200% and 80%, respectively. However, we must say that increasing sales numbers of tablets and smartphones are not a good news for DRAM makers.

First of all, PC sales, for sure, will suffer from the crowding effect, which may cause the commodity DRAM market to shrink. And also, tablets and smartphones do not need high contents per unit. For example, the tablets’ average content per unit is less than 1GB and smartphones’ around 512MB. Both are much lower than PC’s 3.3GB at the moment.

In spite of that Mobile DRAM has higher profit margins than the commodity DRAM, the outlook for Mobile DRAM prices in 2H11 might not be so optimistic due to the possibility of over-supply and the downward revision of the tablet shipment.

Content per box growth is limited by the rise of ARM and no 'Killer App' for PC

From software structure’s perspective, Windows 7, ridden of Vista’s low executing efficiency and high consumption of memories, only needs 2GB memory to perform effectively and smoothly. Streamlining of the OS operations, in recent years, really goes against the needs for more memory capacities. We no longer can expect the launch of a new operation system to drive up the memory demands.

Unless Windows 8, to be released in 2012, can come up with some Killer Apps, the growth of the demand in higher content per box is slim. At Computex this year, Microsoft announced its official development of Windows 8 on ARM structure to take up a market share of tablets and smartphones. This not only indicates that PC growth has slowed down but also cast another uncertainty over DRAM demand in the future.

Post-PC era has officially arrived. DRAM makers are changing their business courses by shifting their capacities to Mobile DRAM to avoid over-supply for PC DRAM and also to cater to growing markets for tablets and smartphones. However, the sudden rise in Mobile DRAM production will probably lead to the possibility of over-supply in the long term. Memory makers should develop the ability of mixing their products to the full potential with time when pursuing the utmost profitability.
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