Ad
Ad
Ad
Ad
Ad
Ad
Components | August 11, 2011

2GB contract price ASP decreases by over 15% in 1HAug

Contract price for 1HAug. saw the largest biweekly decrease since June. DDR 2GB and 4GB contract price was USD 12.25 (1Gb USD 0.61) and USD 23.5 (2Gb USD 1.31) respectively, representing decreases of 15.52% and 16.07%.
Since DRAM manufacturers are pushing to make 4GB DRAM modules the mainstream, the lowest concluded transaction price fell to US$22.5, a decline of 18.18%. From the market perspective, as PC OEMs are conservative about shipments in 2H11 and demand has not recovered despite the peak season, purchasing has decreased dramatically.

Under pressure to improve performance, DRAM makers are all lowering prices in hopes of increasing shipments, resulting in a huge decrease for 1HAugust contract price. DRAMeXchange expects contract price for 2HAug. to continue falling, following the trend of 1HAug.

contract price approaches cash cost, production cuts only method of self-preservation

As DRAM spot price continues to fall, manufacturers are in a predicament: the more they sell, the more losses they suffer. Since PC DRAM content per box has not increased significantly and economies worldwide continue to worsen, severe supply and demand imbalance has brought the DRAM industry back to the state it was in during the 2009 financial crisis.

There is news of Taiwanese DRAM manufacturers cutting production or storing raw wafers in a wafer bank. However, the goal of these measures is not solely to help price recovery; rather, manufacturers are merely trying to survive the storm by decreasing cash outflow. Due to ProMOS’ financial difficulties, starting in July the company decreased their wafer start volume from 50K to 25K starts per month.

The manufacturer was also the first to cease production of DDR3 wafer starts, whose price has seen the greatest decrease. Currently only DDR and DDR2 products are being manufactured, with the possibility of further wafer start cuts.

As for Powerchip and Rexchip, they are currently negotiating with Elpida and seriously considering depositing raw wafers in wafer banks. Powerchip has made production cuts and begun to decrease commodity DRAM wafer starts. If price continues to fall, they will consider decreasing output even more in order to decrease cash outflow.

As for Nanya and Inotera, as they had a high capex due to the transition from trench to stack technology last year and half of their total output still comes from 50nm processes, their production costs are higher than other DRAM manufacturers. The companies are in potential dire straits; losing a chip and a half for each chip sold.

Currently, there is news of Inotera remaining at fully loaded capacity, while Nanya has already begun cutting wafer start volume. Aside from continuing to increase the proportion of specialty and server DRAM, any other strategies that might possibly enable the companies to hold onto their cash are being discussed internally.

As for Korean manufacturers, Samsung expects to begin mass production on 28nm processes in 2H11, and the yield rate for 35nm production has already stabilized. Due to the company’s cost advantage, Samsung is not currently considering any production cuts and will stick with their goal of increasing DRAM market share.

As for Hynix, they have decreased commodity DRAM revenue to approximately 30%, and the rest of their capacity has been transferred to more profitable server DRAM, mobile DRAM, and other specialty products. Hynix’s performance has been relatively stable throughout this period of price collapse, and they do not have any production cuts planned at this stage.

From a market perspective, Taiwanese DRAM manufacturers are cutting production in a bid to save themselves, not in anticipation of a price recovery. However, at the moment PC demand for 2H11 is weak and content per box has not increased significantly. Therefore, DRAMeXchange expects that the oversupply state of commodity DRAM bit output will reach 20%, and if no Korean manufacturers decide to join the others in making capacity cuts, the market will not return to a state of balanced supply and demand, and DRAM price will continue to fall.

Comments

Please note the following: Critical comments are allowed and even encouraged. Discussions are welcome. Verbal abuse, insults and racist / homophobic remarks are not. Such comments will be removed.
Further details can be found here.
Ad
Ad
Load more news
October 15 2018 11:56 pm V11.6.0-1