© norebbo-dreamstime.com Electronics Production | January 07, 2013
DRAM contract price uptrend continues in 2HDec.
Affected by spot market prices, DRAM contract prices increased by 2% on average in 1HDec., and the uptrend continues in 2HDec. Prices for mainstream 4GB modules in particular rose, by 3.17%.
Deals were concluded at around US$16.25, US$0.50 higher than average contract price (US$15.75) and indication that some DRAM suppliers have more negotiating power than others. From the market perspective, as the Korean makers plan to drastically cut PC DRAM production levels in 2013, focusing capex and technology migration on mobile DRAM products, PC OEMs are left with fewer suppliers to choose from, and subsequently, less bargaining power. DRAM manufacturers are gradually gaining more control over price. While PC demand visibility is limited, due to supply side factors and PC OEMs’ inventory restocking, DRAM prices will likely stay on an uptrend at least until it hits the Korean manufacturers’ break-even point. Looking towards the first quarter, past experiences show that there is generally no strong demand growth aside from Chinese New Year purchasing. However, due to the aforementioned supply side changes, the sufficiency ratio is expected to improve significantly compared to the previous quarter. While the market is not likely to see short supply, certain types of chips will see significant increases as technology migrates to the next-generation process. As long as the necessary capacity cuts continue to be made, TrendForce forecasts supply and demand will likely balance out in 2013, with the six-month commodity DRAM downtrend finally coming to an end. 5 Major Trends to Look for in 2013 DRAM Industry 2012 has been a tough year for the DRAM industry, as evidenced by Micron’s official merger with Elpida, the decision of Taiwanese DRAM makers to quit and transition to the foundry business, and the fact that 2Gb prices have dropped to as low as $0.6 USD—an indication of the financial woes encountered by manufacturers within the industry. Luckily, there have been a few promising signs; the DRAM manufacturers’ implementation of capacity-adjustments, for example, has contributed to an astounding 20% growth in DRAM spot prices. These movements, in turn, helped provide stimulation for the contract prices, which have exhibited an uptrend recently. Heading into 2013, TrendForce expects the following 5 trends to emerge within the industry: 1. Samsung, SK Hynix, and Micron to Grow Stronger and Dominate the Market Although Micron is still in the process of merging with Elpida, the procedures are expected to be complete by sometime around 2H13. Taking into account the fact that Micron’s revenue is on par with that of SK Hynix, and considering the position Samsung currently holds within the DRAM industry, the three companies’ combined market share is projected to amount to more than 90%. Not only is this indicative of the big players’ growing stature, it also confirms the market’s movement towards an oligopolistic state. With their own DRAM and NAND Flash technology, each of the three companies will be able to utilize efficient and appropriate product mixes, and in turn charge prices at a level similar to those in an oligopolistic market. These will be beneficial to the DRAM industry in that DRAM prices may be propelled back to healthy levels. 2. Mobile and Server DRAM Will Become the Market Mainstream while Production for PC DRAM Decreases Given the popularity of smartphones and tablets, TrendForce predicts that for 2H13, mobile DRAM will replace PC DRAM as the next mainstream item within the market. LPDDR2 will still be the standard format in 2013, and with Intel’s Haswell ready to launch, mobile DRAM will make its first major entrance into the NB market. At the same time, benefiting from the growing interest in online cloud services, server DRAM has shown a 30% increase in terms of density growth, and is expected to account for approximately 20% of overall DRAM production for 2013. Output for PC DRAM, on the other hand, will likely experience further cuts, with bit growth forecasted to drop by around 27% compared to the same period of last year. 3. 20nm and 30nm Technology Will Become the Mainstream in 2013 Given that the state of the DRAM market had not been promising in recent years, the majority of DRAM manufacturers have found themselves facing a lot of financial pressure. Making matters more difficult is the fact that the migration towards 20nm technology requires the purchase of EUV machinery, which costs substantially greater than immersion scanners, and in turn led various DRAM makers to delay the 20nm-and-under process migrations to next year. TrendForce predicts that the 20nm and 30nm manufacturing process will be the mainstream for DRAM manufacturers this year, breaking the previous two-migrations-a-year tradition. 4. Taiwanese DRAM makers to Quit PC DRAM market in 2013, Transition to Specialty DRAM and Foundry Business During the second half of last year, Nanya’s official announcement to quit the PC DRAM market marked the end of the Taiwanese brands’ presence in commodity DRAM territory. Similar to Winbond, Nanya will now direct the majority of its focus to manufacturing specialty DRAM. Powerchip has gone on a similar route by transitioning to the foundry business and ending its PC DRAM production. Providing support to Micron, Rexchip and Inotera have stuck to their foundry business model, continuing their production of PC DRAM. 5. Production Cuts Taking Effect, 2013 Momentum to Bring New Opportunities When the 2Gb PC DRAM prices dropped to as low as $0.6 USD during the second half of last year, various manufacturers took gradual steps to not only lower production, but also transition to the production of mobile and server DRAM. PC-OEM’s, on the other hand, replenished their inventory in preparation for the end of the year. In December, spot prices soared by 20%, whereas contract prices rebounded and begun to go on an uptrend. Despite the future of PC demand still being uncertain, with production of PC DRAM continuing to drop, 2013 prices are likely to continue increasing, and may gradually return to healthy levels in the future.