Components | March 13, 2012
DRAM market in Wait-and-See mode
DRAM Market in Wait-and-See Mode, 4GB ASP increases by 5.7% in 1HMar., contract price continues to climb.
According to research by DRAMeXchange, a division of TrendForce, as it is still unclear as to whether Elpida will survive its financial crisis, the DRAM market is taking a wait-and-see approach, and contract price negotiations have been more conservative than usual. However, 1HMar. contract price still reflects the uncertainty surrounding DRAM supply. Module price is climbing steadily – average 4GB module price increased 5.7% to US$18.5, while highest price was $18.75. Average 2GB module price was US$10.25, up 5.13% from US$9.75. Mainstream DDR3 2Gb contract price exceeded US$1 for the first time this year. With a US$6.23 billion debt, regardless of whether Elpida withdraws from the market or continues on after making changes, the manufacturer’s troubles will surely impact and cause some reshuffling on the DRAM market. TrendForce believes, both buyers and sellers are basing their future price negotiation strategies on whether or not the Japanese government decides to bail out Elpida. As the third largest DRAM market share holder, Elpida’s fate, as well as their capacity allocation, will have a significant impact on the DRAM price trend. Facing Weak Spot Market Demand, Capacity Adjustments Vital As for the spot market, it has been less than a month since Elpida filed for bankruptcy protection on February 27. During this time, DDR3 2Gb 1333Mhz chip ASP has only increased by 11% - with several fluctuations throughout the period, there is no clear uptrend in concluded transaction price. Reflecting currently weak market demand, price quote and purchasing momentum has not been strong. Under the gloomy circumstances, while sellers have attempted to increase price quotes, there is just not enough demand. Looking at capacity, as Elpida and subsidiary Rexchip’s capacity has not yet been withdrawn from the market, currently the PC DRAM market remains in a state of oversupply. This year’s price trend will be dependent on supply-side adjustments, as PC shipment growth and demand momentum are clearly showing a downtrend – capacity withdrawal is the only hope the DRAM industry has for returning to balanced supply and demand. Elpida Calls it Quits, Fate of Hiroshima Fab and Rexchip Greatest Variable Affecting Industry Supply According to DRAMeXchange research, major PC OEMs have shown increased demand towards suppliers, a move to guard against a supply chain break in the wake of Elpida’s bankruptcy protection filing. It is reported that Elpida is currently drafting several corporate restructuring proposals they must present to the government within six weeks of filing. Meanwhile, the Japanese government is evaluating whether or not Elpida holds additional value for other industries or the nation as a whole. As Elpida has finished development on the 25nm process, the maker is not far behind the Korean manufacturers. Furthermore, with 17% of the global mobile DRAM market, Elpida’s impact is greater in the mobile DRAM sector than in the commodity DRAM sector. While Toshiba has indicated an Elpida merger or acquisition is unlikely, they have not ruled out the possibility of a technological partnership. By working together to develop MCP (multi-chip packaging) and target the mobile device market, the makers would stand a chance going up against the Korean manufacturers. Furthermore, due to Elpida’s high debt, it was decided at Rexchip’s board meeting last week that when Elpida and Powerchip are no longer able to pay for Rexchip’s products, Rexchip will be allowed to ship to some module makers on its own - a clear indication Elpida is at wits’ end. As it seems that Elpida will be unable to avoid liquidating current assets, the possible sale of subsidiary Rexchip has become the greatest variable affecting future DRAM industry capacity. TrendForce indicates, if Rexchip switches hands, 65K starts per month will be gradually migrated to the process of the maker’s new parent company, which will take six months at minimum. Not only will capacity utilization rate see a huge drop, yield rate will need time to improve as well. Such a situation would greatly benefit the current DRAM oversupply situation – commodity DRAM would have a chance to see balanced supply and demand in 2H12, and the possibility of DRAM price recovery would increase considerably.
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